Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 6, 2017,~~August 3, 2018, there were ~~180,680,911~~174,609,840 shares of the registrant's $0.01 par value common stock outstanding.

(In thousands, except per share amounts)

September 30, 2017

December 31, 2016

ASSETS

Current assets:

Cash and cash equivalents

$
104,301

$
95,607

Restricted cash

5,123

1,003

Accounts receivable, net of allowance of $36,030 and $32,670 as of
   September 30, 2017 and December 31, 2016, respectively

442,872

405,172

Prepaid expenses and other current assets

115,701

102,551

Total current assets

667,997

604,333

Available for sale marketable securities

0

149,100

Fixed assets, net

165,434

148,810

Software development costs, net

207,055

163,879

Intangible assets, net

717,233

741,403

Goodwill

1,971,950

1,924,052

Deferred taxes, net

4,234

2,791

Other assets

149,485

97,791

Total assets

$
3,883,388

$
3,832,159

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$
114,291

$
126,144

Accrued expenses

71,820

86,135

Accrued compensation and benefits

70,037

64,291

Deferred revenue

392,462

363,772

Current maturities of long-term debt

24,550

15,158

Current maturities of non-recourse long-term debt - Netsmart

2,749

2,451

Current maturities of capital lease obligations

8,517

9,126

Total current liabilities

684,426

667,077

Long-term debt

747,441

717,853

Non-recourse long-term debt - Netsmart

625,513

576,918

Long-term capital lease obligations

7,708

9,877

Deferred revenue

19,319

18,009

Deferred taxes, net

145,432

141,752

Other liabilities

86,474

39,787

Total liabilities

2,316,313

2,171,273

Redeemable convertible non-controlling interest - Netsmart

420,572

387,685

Commitments and contingencies

Stockholders’ equity:

Preferred stock: $0.01 par value, 1,000 shares authorized,
   no shares issued and outstanding as of September 30, 2017 and December 31, 2016

0

0

Common stock: $0.01 par value, 349,000 shares authorized as of September 30, 2017
   and December 31, 2016; 269,154 and 180,650 shares issued and outstanding as of
  September 30, 2017, respectively; 267,997 and 180,510 shares issued and outstanding
   as of December 31, 2016, respectively

2,692

2,680

Treasury stock: at cost, 88,504 and 87,487 shares as of September 30, 2017 and
   December 31, 2016, respectively

(322,735
)

(310,993
)
Additional paid-in capital

1,782,432

1,789,959

Accumulated deficit

(354,928
)

(187,351
)
Accumulated other comprehensive loss

(2,067
)

(61,829
)
Total Allscripts Healthcare Solutions, Inc.'s stockholders' equity

1,105,394

1,232,466

Non-controlling interest

41,109

40,735

Total stockholders’ equity

1,146,503

1,273,201

Total liabilities and stockholders’ equity

$
3,883,388

$
3,832,159

(In thousands, except per share amounts)	June 30, 2018		December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	135,851	$	155,839
Restricted cash		4,925		6,659
Accounts receivable, net of allowance of $53,555 and $37,735 as of June 30, 2018 and December 31, 2017, respectively		522,144		567,873
Contract assets		64,419		0
Prepaid expenses and other current assets		128,325		115,463
Total current assets		855,664		845,834
Fixed assets, net		160,585		165,603
Software development costs, net		225,251		222,189
Intangible assets, net		839,173		826,872
Goodwill		2,107,818		2,004,953
Deferred taxes, net		4,457		4,574
Contract assets - long-term		46,173		0
Other assets		114,555		148,849
Assets attributable to discontinued operations		0		11,276
Total assets	$	4,353,676	$	4,230,150

(In thousands, except per share amounts)	June 30, 2018			December 31, 2017
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	121,622		$	97,583
Accrued expenses		113,122			85,915
Accrued compensation and benefits		109,120			99,632
Deferred revenue		531,189			546,830
Current maturities of long-term debt		19,509			27,687
Current maturities of non-recourse long-term debt - Netsmart		2,766			2,755
Current maturities of capital lease obligations		9,846			7,865
Total current liabilities		907,174			868,267
Long-term debt		983,133			906,725
Non-recourse long-term debt - Netsmart		624,549			625,193
Long-term capital lease obligations		6,666			7,105
Deferred revenue		20,653			24,047
Deferred taxes, net		129,262			93,643
Other liabilities		80,340			92,205
Liabilities attributable to discontinued operations		4,443			21,358
Total liabilities		2,756,220			2,638,543
Redeemable convertible non-controlling interest - Netsmart		455,832			431,535
Commitments and contingencies
Stockholders’ equity:
Preferred stock: $0.01 par value, 1,000 shares authorized, no shares issued and outstanding as of June 30, 2018 and December 31, 2017		0			0
Common stock: $0.01 par value, 349,000 shares authorized as of June 30, 2018 and December 31, 2017; 270,709 and 174,534 shares issued and outstanding as of June 30, 2018, respectively; 269,335 and 180,832 shares issued and outstanding as of December 31, 2017, respectively		2,707			2,693
Treasury stock: at cost, 96,175 and 88,504 shares as of June 30, 2018 and December 31, 2017, respectively		(424,641	)		(322,735	)
Additional paid-in capital		1,766,863			1,781,059
Accumulated deficit		(228,308	)		(338,150	)
Accumulated other comprehensive loss		(4,206	)		(1,985	)
Total Allscripts Healthcare Solutions, Inc.'s stockholders' equity		1,112,415			1,120,882
Non-controlling interest		29,209			39,190
Total stockholders’ equity		1,141,624			1,160,072
Total liabilities and stockholders’ equity	$	4,353,676		$	4,230,150

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share amounts)	2017			2016			2017			2016			2018			2017			2018			2017
Revenue:
Software delivery, support and maintenance	$	294,221		$	252,692		$	845,951		$	731,721		$	336,406		$	275,033		$	666,172		$	543,221
Client services		155,221			139,692			443,057			392,742			189,171			151,058			373,331			296,345
Total revenue		449,442			392,384			1,289,008			1,124,463			525,577			426,091			1,039,503			839,566
Cost of revenue:
Software delivery, support and maintenance		86,893			86,537			259,361			240,860			114,442			89,071			218,852			172,468
Client services		132,629			116,415			379,797			335,957			165,794			122,229			320,562			247,168
Amortization of software development and acquisition-related assets		28,001			23,273			81,788			62,905			32,678			27,300			66,451			53,787
Total cost of revenue		247,523			226,225			720,946			639,722			312,914			238,600			605,865			473,423
Gross profit		201,919			166,159			568,062			484,741			212,663			187,491			433,638			366,143
Selling, general and administrative expenses		117,352			98,778			340,234			277,733			149,081			112,037			292,151			222,882
Research and development		51,057			45,142			146,748			140,070			80,342			46,459			150,319			95,691
Asset impairment charges		0			0			0			4,650			30,075			0			30,075			0
Amortization of intangible and acquisition-related assets		8,137			5,365			23,340			14,944			11,962			7,891			24,210			15,203
Income from operations		25,373			16,874			57,740			47,344
(Loss) income from operations														(58,797	)		21,104			(63,117	)		32,367
Interest expense		(22,252	)		(19,367	)		(62,722	)		(42,757	)		(26,454	)		(20,290	)		(51,500	)		(40,470	)
Other (loss) income, net		(570	)		(6	)		(545	)		466			(19	)		(214	)		(65	)		25
Impairment of and losses on long-term investments		(20,700	)		0			(165,290	)		0
Gain on sale of businesses, net														173,129			0			172,258			0
Impairment of long-term investments														(9,987	)		(144,590	)		(15,487	)		(144,590	)
Equity in net income (loss) of unconsolidated investments		449			0			706			(7,501	)		767			(28	)		706			257
(Loss) income before income taxes		(17,700	)		(2,499	)		(170,111	)		(2,448	)
Income tax benefit (provision)		238			2,656			1,073			2,596
Net (loss) income		(17,462	)		157			(169,038	)		148
Less: Net income attributable to non-controlling interests		(163	)		(151	)		(352	)		(142	)
Income (loss) from continuing operations before income taxes														78,639			(144,018	)		42,795			(152,411	)
Income tax (provision) benefit														(3,683	)		1,007			(769	)		835
Income (loss) from continuing operations, net of tax														74,956			(143,011	)		42,026			(151,576	)
(Loss) income from discontinued operations, net of tax														(684	)		0			3,731			0
Net income (loss)														74,272			(143,011	)		45,757			(151,576	)
Less: Net loss (income) attributable to non-controlling interests														2,700			264			3,490			(189	)
Less: Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart		(10,962	)		(10,191	)		(32,887	)		(18,344	)		(12,148	)		(10,963	)		(24,297	)		(21,925	)
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	(28,587	)	$	(10,185	)	$	(202,277	)	$	(18,338	)
Loss per share - basic attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	(0.16	)	$	(0.06	)	$	(1.12	)	$	(0.10	)
Loss per share - diluted attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	(0.16	)	$	(0.06	)	$	(1.12	)	$	(0.10	)
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders													$	64,824		$	(153,710	)	$	24,950		$	(173,690	)

Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per share:
Basic
Continuing operations													$	0.36		$	(0.85	)	$	0.11		$	(0.96	)
Discontinued operations														0.00			0.00			0.03			0.00
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per share													$	0.36		$	(0.85	)	$	0.14		$	(0.96	)

Diluted
Continuing operations													$	0.36		$	(0.85	)	$	0.11		$	(0.96	)
Discontinued operations														0.00			0.00			0.03			0.00
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per share													$	0.36		$	(0.85	)	$	0.14		$	(0.96	)

The accompanying notes are an integral part of these consolidated financial statements.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands)

2017

2016

2017

2016

Net (loss) income

$
(17,462
)

$
157

$
(169,038
)

$
148

Other comprehensive income (loss):

Foreign currency translation adjustments

693

150

3,040

(49
)
Change in unrealized gain (loss) on available for sale securities

(4
)

9,750

56,507

(8,365
)
Change in fair value of derivatives qualifying as cash flow hedges

(692
)

686

341

900

Other comprehensive (loss) income before income tax benefit (expense)

(3
)

10,586

59,888

(7,514
)
Income tax benefit (expense) related to items in other
comprehensive loss

271

(270
)

(126
)

(355
)
Total other comprehensive income (loss)

268

10,316

59,762

(7,869
)
Comprehensive loss

(17,194
)

10,473

(109,276
)

(7,721
)
Less: Comprehensive income attributable to
non-controlling interests

(163
)

(151
)

(352
)

(142
)
Comprehensive (loss) income, net

$
(17,357
)

$
10,322

$
(109,628
)

$
(7,863
)

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Net income (loss)	$	74,272		$	(143,011	)	$	45,757		$	(151,576	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(1,685	)		832			(1,562	)		2,347
Change in unrealized gain on available for sale securities		0			131,213			0			56,511
Change in fair value of derivatives qualifying as cash flow hedges		(460	)		(315	)		(1,093	)		1,033
Other comprehensive (loss) income before income tax benefit (expense)		(2,145	)		131,730			(2,655	)		59,891
Income tax benefit (expense) related to items in other comprehensive income (loss)		120			124			434			(397	)
Total other comprehensive (loss) income		(2,025	)		131,854			(2,221	)		59,494
Comprehensive income (loss)		72,247			(11,157	)		43,536			(92,082	)
Less: Comprehensive loss (income) attributable to non-controlling interests		2,700			264			3,490			(189	)
Comprehensive income (loss), net	$	74,947		$	(10,893	)	$	47,026		$	(92,271	)

The accompanying notes are an integral part of these consolidated financial statements.

	Nine Months Ended September 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2018			2017
Cash flows from operating activities:
Net (loss) income	$	(169,038	)	$	148
Net income (loss)							$	45,757		$	(151,576	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		155,108			120,473			132,217			101,297
Stock-based compensation expense		28,140			29,717			19,962			18,461
Excess tax benefits from stock-based compensation		0			(972	)
Deferred taxes		(5,324	)		(4,198	)		588			(4,659	)
Asset impairment charges		0			4,650			30,075			0
Impairment of and losses on long-term investments		165,290			0
Equity in net (income) loss of unconsolidated investments		(706	)		7,501
Impairment of long-term investments								15,487			144,590
Equity in net income of unconsolidated investments								(706	)		(257	)
Gain on sale of businesses, net								(172,258	)		0
Other losses, net		3,711			2,057			(365	)		2,294
Changes in operating assets and liabilities (net of businesses acquired):
Accounts receivable, net		(31,256	)		(12,723	)
Accounts receivable and contract assets, net								11,411			(13,047	)
Prepaid expenses and other assets		(6,939	)		3,381			(567	)		(9,231	)
Accounts payable		2,908			26,341			19,416			(2,830	)
Accrued expenses		(6,196	)		(8,843	)		359			(5,187	)
Accrued compensation and benefits		5,930			(12,933	)		(947	)		(2,102	)
Deferred revenue		18,661			30,587			(32,932	)		24,923
Other liabilities		12,894			(28	)		(957	)		6,683
Net cash provided by operating activities		173,183			185,158			66,540			109,359
Cash flows from investing activities:
Capital expenditures		(40,216	)		(25,046	)		(16,613	)		(25,035	)
Capitalized software		(107,079	)		(69,994	)		(68,987	)		(71,582	)
Cash paid for business acquisitions, net of cash acquired		(54,308	)		(935,280	)		(179,041	)		(3,975	)
Cash received from sale of businesses, net								246,801			0
Purchases of equity securities, other investments and related intangible assets		(5,423	)		(20,685	)		(2,723	)		(1,323	)
Other proceeds from investing activities		215			37			45			0
Net cash used in investing activities		(206,811	)		(1,050,968	)		(20,518	)		(101,915	)
Cash flows from financing activities:
Proceeds from sale or issuance of common stock		0			84			212			0
Proceeds from issuance of redeemable convertible preferred stock - Netsmart		0			333,606
Excess tax benefits from stock-based compensation		0			972
Taxes paid related to net share settlement of equity awards		(6,777	)		(7,379	)		(8,610	)		(6,554	)
Payments of capital lease obligations		(9,013	)		(3,858	)		(5,388	)		(5,966	)
Credit facility payments		(115,281	)		(80,507	)		(217,434	)		(110,939	)
Credit facility borrowings, net of issuance costs		189,698			654,135			275,843			120,000
Repurchase of common stock		(12,077	)		(71,082	)		(101,905	)		(12,077	)
Payment of acquisition financing obligations		(2,398	)		0			(3,226	)		0
Proceeds from sales of subsidiary shares to non-controlling interest		1,494			0
Net cash provided by financing activities		45,646			825,971
Purchases of subsidiary shares owned by non-controlling interest								(6,945	)		0
Net cash used in financing activities								(67,453	)		(15,536	)
Effect of exchange rate changes on cash and cash equivalents		796			217			(291	)		596
Net increase (decrease) in cash and cash equivalents		12,814			(39,622	)
Net decrease in cash and cash equivalents								(21,722	)		(7,496	)
Cash, cash equivalents and restricted cash, beginning of period		96,610			116,873			162,498			96,610
Cash, cash equivalents and restricted cash, end of period	$	109,424		$	77,251		$	140,776		$	89,114

The accompanying notes are an integral part of these consolidated financial statements.

The consolidated financial statements include the accounts of Allscripts Healthcare Solutions, Inc. (“Allscripts”) and its wholly-owned subsidiaries and controlled affiliates. All significant intercompany balances and transactions have been eliminated. Each of the terms “we,” “us,” “our” or the “Company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.

The unaudited interim consolidated financial statements as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These interim consolidated financial statements are unaudited and, in the opinion of our management, include all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the consolidated financial statements for the periods presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 are not necessarily indicative of the results to be expected for the full year ending December 31, ~~2017.~~2018.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with the SEC's rules and regulations for interim reporting, although the Company believes that the disclosures made are adequate to make that information not misleading. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (our “Form 10-K”).

The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates.

During the first quarter of 2018, we changed the presentation of certain bundled revenue streams. Such revenue was previously included as part of software delivery, support and maintenance revenue. Under the new presentation, such revenue is included as part of client services revenue. The revenues previously reported for the three and six months ended June 30, 2017 have been recast to match the new presentation by reducing software delivery, support and maintenance and increasing client services by $4.2 million and $8.5 million, respectively.

We adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASC 606”) effective on January 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. There have been no other significant changes to our significant accounting policies from those disclosed in our Form 10-K.

In ~~March~~January 2016, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting Standards Update No. ~~2016-07,~~ 2016-01,~~Investments – Equity Method~~ “Recognition and ~~Joint Ventures (Topic 323): Simplifying~~Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The amendments in ASU 2016-01 modify the ~~Transition~~requirements related to the ~~Equity Method~~measurement of ~~Accounting~~ ~~(“ASU 2016-07”). The guidance in ASU 2016-07 eliminates the requirement that, when an investment qualifies for use of the equity method as a result of an increase~~certain financial instruments in the ~~level~~statement of ~~ownership interest or degree of influence, an investor must adjust the investment,~~financial condition and results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adoptoperation. Equity investments (except those accounted for under the equity method of accounting asor those that result in consolidation of the ~~date the investment becomes qualified~~investee) are required to be measured at fair value with changes in fair value recognized in net income. An entity may continue to elect to measure equity investments which do not have a readily determinable fair value at cost with adjustments for ~~equity method accounting. The amendments also require~~impairment, if any, and observable changes in price. In addition, for a liability (other than a derivative liability) that an entity ~~that has an available-for-sale equity security that becomes qualified for~~measures at fair value, any change in fair value related to the ~~equity method of accounting recognize through earnings~~instrument-specific credit risk (i.e., the ~~unrealized holding gain or loss~~entity’s own credit risk), should be presented separately in ~~accumulated~~ other comprehensive income atand not as a component of net income. ASU 2016-01 also clarifies that an entity should evaluate the ~~date~~need for a valuation allowance on a deferred tax asset related to available-for sale securities in combination with the ~~investment becomes qualified for use of the equity method.~~entity’s other deferred tax assets. ASU ~~2016-07~~2016-01 is effective for interim and annual periods beginning after December 15, ~~2016, and~~2017 with early adoption permitted solely for the instrument-instrument specific credit risk for liabilities measured at fair value. The amendments should be applied ~~prospectively. Early application is permitted. We adopted this new guidance effective January 1, 2017 and the adoption did not have any impact on our consolidated financial statements.~~

~~In March 2016, the FASB issued Accounting Standards Update No. 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718): Improvements to Share-Based Payment Accounting~~ ~~(“ASU 2016-09”). The Company adopted ASU 2016-09 effective January 1, 2017, which requires that tax effects related to employee share-based payments be recorded prospectively as~~by means of a component of the provision for income taxes, thus potentially increasing the volatility in our effective tax rate (see Note 9, “Income Taxes”). Additionally, we prospectively adopted the requirement to present recognized excess tax benefits related to employee share-based payments as an operating activity in the accompanying Consolidated Statements of Cash Flows. ASU 2016-09 also eliminates prospectively the requirement to consider anticipated tax windfalls and shortfalls in the calculation of assumed proceeds under the treasury stock method used for computing the dilutive effect of share-based payment awards in the calculation of diluted earnings per share. Finally, ASU 2016-09 requires the recognition of excess tax benefits related to employee share-based payments, regardless of whether the tax deduction reduces taxes payable. As part of the adoption of this requirement, we decreased the opening balance of accumulated deficit by $1.8 million to recognize excess tax benefits not previously recorded since they did not reduce taxes payable. The adoption of the remaining requirements of ASU 2016-09 did not have a material impact on our financial position or results of operation.

~~In August 2016, the FASB issued Accounting Standards Update No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ ~~(“ASU 2016-15”). The guidance in ASU 2016-15 eliminates the diversity in practice related~~cumulative-effect adjustment to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. We early adopted this new guidance effective January 1, 2017 and the adoption did not have any impact on our consolidated financial statements.

~~In May 2017, the FASB issued Accounting Standards Update No. 2017-09,~~ ~~Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting~~ (“ASU 2017-09”). The guidance in ASU 2017-09 clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. ASU 2017-09 is effective prospectively for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. We early adopted this new guidance effective June 1, 2017 and the adoption did not have any impact on our consolidated financial statements.

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers: Topic 606~~ (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve this principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. As issued, ASU 2014-09 was effective for us for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. On August 12, 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, while also permitting companies to voluntarily adopt the new revenue standardbalance sheet as of the ~~original effective date. In addition, during 2016,~~beginning of the ~~FASB issued ASU 2016-08, ASU 2016-10, 2016-11, 2016-12 and 2016-20, all~~fiscal year of ~~which clarify certain implementation guidance within ASU 2014-09.~~

adoption. The ~~new revenue recognition guidance permits two methods~~amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of ~~adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at~~ the date of ~~initial application (modified retrospective method).~~adoption. We ~~have decided to adopt the standard~~adopted ASU 2016-01 effective January 1, 2018 ~~using the modified retrospective method.~~

~~We have completed~~and there was no immediate impact upon adoption. Refer to Note 4, “Fair Value Measurements and Long-term Investments,” for additional information regarding our assessment of our systems, available data and processes that will be affected by the implementation of this new guidance. We are continuing to work towards establishing policies, updating our processes and implementing necessary changes to be able to comply with the new requirements. Through evaluation of the standard’s requirements, the Company plans to utilize several practical expedients including (i) viewing shipping and handling as a fulfillment cost versus a distinct performance obligation, and (ii) the right to invoice expedient as it relates to transaction-related revenue activities. Based on the results of our assessment to date, we anticipate this standard will have an impact, which could be significant, on our consolidated financial statements. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to our accounting for software license revenue. We expect revenue related to hardware sales, software-as-a-service-based offerings, client services, electronic data interchange services, and managed services to remain substantially unchanged. We expect to recognize a significant portion of license revenue upfront rather than be restricted to payment amounts due under extended payment term contracts as required under the current guidance. We also expect to recognize license revenue upfront rather than over the subscription period from certain multi-year software subscription contracts that include both software licenses and software support and maintenance. Due to the complexity of certain of our license subscription contracts, the actual revenue license recognition treatment required under the new standard will be dependent on contract-specific terms, and may vary in some instances from upfront recognition.

Additionally, we currently only capitalize direct sales commissions that are specifically associated with new or renewal contracts. The new revenue recognition guidance requires the capitalization of all incremental costs of obtaining a contract with a customer that an entity expects to recover. As part of our implementation efforts, we have identified certain indirect commissions and other payments that would be eligible for capitalization under the new guidance because they are also incremental costs solely associated with new or renewal contracts that we expect to recover. As result, we expect to record a deferral for such costs, which could be significant, upon adoption of the new guidance on January 1, 2018.unconsolidated equity investments.

In January 2017, the FASB issued Accounting Standards Update No. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides new accounting guidance to assist an entity in evaluating when a set of transferred assets and activities is a business. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied prospectively to any transactions occurring within the period of adoption. ~~Early adoption~~We adopted ASU 2017-01 effective January 1, 2018 and there was no immediate impact upon adoption.

In June 2018, the FASB issued Accounting Standards Update No. 2018-07, “Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. ASU 2018-07 is ~~permitted, including~~effective for interim orand annual periods ~~in which the financial statements have not been issued or made available for issuance.~~beginning after December 15, 2018. We are currently evaluating the impact of ~~adopting~~ this ~~new~~accounting guidance, including the timing of adoption.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), intended to improve financial reporting about leasing transactions. The new guidance will require entities that lease assets to recognize on their balance sheets the assets and liabilities for the rights and obligations created by those leases and to disclose key information about the leasing arrangements. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. We are currently gathering lease data and have selected specific software to assist us in recording and maintaining an inventory of leases. We will adopt ASU 2016-02 on January 1, 2019 and we are currently evaluating its financial statement impact.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which provides new accounting guidance to simplify the accounting for goodwill impairment. ASU 2017-04 removes Step Two of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new guidance, a goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill assigned to the reporting unit. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. ASU 2017-04 is effective for annual and interim periods in fiscal years beginning after December 15, 2019 with early adoption permitted for any goodwill impairment tests performed after January 1, 2017. The new guidance is to be applied prospectively. We are currently evaluating the impact of this accounting guidance, including the timing of adoption.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which provides new accounting guidance to simplify and improve the reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the amendments in this Update make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after the issuance of this Update. We are currently evaluating the impact of this accounting guidance, including the timing of adoption.

We do not believe that any other recently issued, but not yet effective accounting standards, if adopted, would have a material impact on our consolidated financial statements.

Our two primary revenue streams are (i) software delivery, support and maintenance and (ii) client services. Software delivery revenue consists of all of our proprietary software sales (either under a perpetual or term license delivery model), transaction-related revenue and the resale of hardware and third-party software. Support and maintenance revenue consists of revenue from post-contract client support and maintenance services, which include telephone support services, maintaining and upgrading software and ongoing enhanced maintenance. Client services revenue consists of revenue from managed services solutions, such as private cloud hosting, outsourcing and revenue cycle management, as well as other client services or project-based revenue from implementation, training and consulting services. For some clients, we host the software applications licensed from us using our own or third-party servers. For other clients, we offer an outsourced service in which we assume partial to total responsibility for a healthcare organization’s IT operations using our employees.

In May 2014, the FASB issued ASC 606 to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under the previous FASB Accounting Standards Codification 605, Revenue Recognition (“ASC 605”), including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Additionally, ASC 606 provides guidance related to costs of obtaining a contract with a customer that an entity expects to recover.

The new revenue recognition guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We adopted the standard effective on January 1, 2018 using the modified retrospective method. We also implemented internal controls, and continue to refine, our updated processes and key systems to allow us to continue to comply with the new requirements.

The reported results for the three and six months ended June 30, 2018 reflect the adoption of ASC 606. The comparative information for the three and six months ended June 30, 2017 has not been restated and will continue to be reported under the previous guidance of ASC 605, which was in effect during that period. The table below reflects the cumulative adjustments that were made to balances previously reported in the condensed consolidated balance sheet as of December 31, 2017. The majority of the cumulative adjustments were recorded during the quarter ended March 31, 2018. During the quarter ended June 30, 2018, we identified additional cumulative adjustments, which resulted in an increase to retained earnings of $14.0 million, an increase to contract assets of $15.9 million, an increase to deferred taxes, net of $4.9 million and a decrease to deferred revenue of $3.0 million.

The adoption of ASC 606 had no impact on cash from or used in operating, financing or investing activities reported in our consolidated statement of cash flows for the year ended December 31, 2017. The following tables compare the reported condensed consolidated balance sheet and statement of operations as of and for the three and six months ended June 30, 2018 to the pro-forma amounts assuming the previous guidance of ASC 605 had been in effect:

The recognition of revenue related to hardware sales, software-as-a-service-based offerings, client services, electronic data interchange services and managed services remained substantially unchanged under ASC 606. The adoption of ASC 606 resulted in an increase in contract assets driven by upfront recognition of revenue, rather than over the subscription period, from certain multi-year software subscription contracts that include both software licenses and software support and maintenance.

Under ASC 605, we only capitalized direct sales commissions that were specifically associated with new or renewal contracts. The new revenue recognition guidance under ASC 606 requires the capitalization of all incremental costs of obtaining a contract with a customer that an entity expects to recover. As part of our implementation efforts, we identified certain indirect commissions and other payments that were eligible for capitalization under ASC 606 as they were incremental costs solely associated with new or renewal contracts that we expected to recover. Certain costs related to the fulfillment of contracts will also be capitalized. As a result, we recorded a deferral for such costs of $8.6 million, net of tax, upon adoption of the new guidance on January 1, 2018, which was included in the cumulative effect of initially applying ASC 606.

Capitalized costs to obtain or fulfill a contract are amortized over periods ranging from two to nine years which represent the initial contract term or a longer period, if renewals are expected and the renewal commission, if any, is not commensurate with the initial commission. We classify such capitalized costs as current or non-current based on the expected timing of expense recognition. The current and non-current portions are included in prepaid expenses and other current assets, and other assets, respectively, in our consolidated balance sheets.

At June 30, 2018, we had $26.5 million and $36.0 million of capitalized costs to obtain or fulfill a contract included in prepaid expenses and other current assets and other assets, respectively, in our consolidated balance sheets. During the three ended June 30, 2018, we recognized $7.6 million of amortization expense related to such capitalized costs, of which $7.5 million is included in selling, general and administrative expenses and $0.1 million is included in cost of revenue in our consolidated statements of operations. During the six months ended June 30, 2018, we recognized $15.8 million of amortization expense related to such capitalized costs, of which $15.5 million is included in selling, general and administrative expenses and $0.3 million is included in cost of revenue in our consolidated statement of operations.

The timing of revenue recognition, billings and cash collections results in billed and unbilled accounts receivables, contract assets and customer advances and deposits. Accounts receivable, net includes both billed and unbilled amounts where the right to receive payment is unconditional and only subject to the passage of time. Contract assets include amounts where revenue recognized exceeds the amount billed to the customer and the right to payment is not solely subject to the passage of time. Deferred revenue includes advanced payments and billings in excess of revenue recognized. Our contract assets and deferred revenue are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term based on the timing of when we expect to complete the related performance obligations and bill the customer. Deferred revenue is classified as current or long-term based on the timing of when we expect to recognize revenue.

In general, with the exception of fixed fee project-based client service offerings (such as implementation services), we sell our software solutions on date-based milestone events where control transfers and use of the software occurs on the delivery date but the associated payments for the software license occur on future milestone dates. In such instances, unbilled amounts are included in contract assets since our right to receive payment is conditional upon the continued functionality of the software and the provision of ongoing support and maintenance. Our fixed fee project-based client service offerings typically require us to provide the services with either a significant portion or all amounts due prior to service completion. Since our right to payment is not unconditional, amounts associated with work prior to the completion date are also deemed to be contract assets.

A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account in ASC 606. A performance obligation is considered distinct when both (i) a customer can benefit from the product or service either on its own or together with other resources that are readily available to the customer and (ii) the promised product or service is separately identifiable from other promises in the contract. Activities related to the fulfillment of a contract that do not transfer products or services to a customer, such as contract preparation or legal review of contract terms, are not deemed to be performance obligations. Based on the similarities in the definitions of a “deliverable” under ASC 605 and “performance obligation” under ASC 606, our identification of performance obligations under ASC 606 did not result in a significant divergence from our existing identification approach.

We generally sell our solutions through multi-element arrangements where we provide the customer with (1) software license, (2) support and maintenance, (3) embedded content such as third-party software and (4) client services. Incremental solutions, such as hardware and managed services are also provided based upon a customer’s preferences and requirements. We deem that a customer is typically able to benefit from a product or service on its own or together with readily available resources when we sell such product or service on a standalone basis. We have historically sold the majority of our performance obligations, with the exception of software licenses, on a standalone basis. Incremental solutions, such as hardware, client services and managed services, are often negotiated and fulfilled on an independent sales order basis as customer needs and requirements change over the course of a relationship period. In addition, support and maintenance and embedded content are provided on a stand-alone basis through the renewal process.

One of the product offerings under our CareInMotion^TM platform requires a significant client service customization to enable the functionality of the software before the customer can obtain benefit from using the product. The significant customization cannot be performed by a third party. Software products and client services are separately identifiable in these contracts, but the performance obligations are not considered distinct in the context of the contract. Therefore, these products and services are treated as combined performance obligations.

Additionally, our support and maintenance obligations include multiple discrete performance obligations, with the two largest being unspecified product upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the multiple discrete performance obligations within our overall support and maintenance obligations can be viewed as a single performance obligation since both the unspecified product upgrades and technical support are activities to fulfill the maintenance performance obligation and are rendered concurrently.

Generally, we do not provide additional warranties to clients above and beyond warranties that the solutions purchased will perform in accordance with the agreed-upon specifications. On rare occasions, when additional warranties are granted, we evaluate on a case-by-case basis whether the additional warranty granted represents a separate performance obligation.

The breakdown of revenue recognized related based on the origination of performance obligations and elected accounting expedients is presented in the table below:

The aggregate amount of contract transaction price related to remaining unsatisfied performance obligations (commonly referred to as “backlog”) represents contracted revenue that has not yet been recognized and includes both deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Total backlog equaled $4.8 billion as of June 30, 2018, of which we expect to recognize approximately 38% over the next 12 months, and the remaining 62% thereafter.

The majority of our contracts contain provisions that require customer payment no later than one year from the transfer of control of the related performance obligation. Perpetual software license contracts in which payments range from 2 to 10 years contain a financing component. Interest income is recognized in these circumstances and totaled $0.3 million and $0.5 million during the three and six months ended June 30, 2018.

We have elected to exclude from the measurement of the transaction price all taxes (e.g. sales, use, value-added, etc.) assessed by government authorities and collected from a customer. Therefore, revenue is recognized net of such taxes.

Within the normal course of business, we contract with customers to deliver and ship tangible products such as computer hardware or licensed software disks. In these situations, the control of the products transfers to the customer when the product reaches the shipper based on free on board (FOB) shipping clauses. We have elected to use the practical expedient allowed under ASC 606 to account for shipping and handling activities that occur after the customer has obtained control of a promised good as fulfillment costs rather than as an additional promised service and, therefore, we do not allocate a portion of the transaction price to a shipping service obligation. Instead, we record as revenue any amounts billed to customers for shipping and handling costs and record as cost of revenue the actual shipping costs incurred.

Additionally, our standard contract terms allow for the reimbursement by a customer for certain travel expenses necessary to provide on-site services to the customer, such as implementation and training. Such reimbursed travel expenses are reported on a gross basis. Since such reimbursed travel expenses do not represent a distinct good or service nor represent incremental value provided to a customer, a performance obligation is deemed not to exist. In certain situations, however, when the allowable reimbursable expenses amount is capped, we believe that such cap represents the most likely amount of variable consideration and the capped amount is included in the total contract transaction price.

~~2. Business Combinations~~In accordance with ASC 606, if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice (“right-to-invoice” practical expedient). We have elected to utilize this expedient as it relates to transaction-based services (such as revenue cycle management) and electronic data interchange transactions.

We recognize revenue only when we satisfy an identified performance obligation (or bundle of obligations) by transferring control of a promised product or service to a customer. We consider a product or service to be transferred when a customer obtains control because a customer has sole possession of the right to use (or the right to direct the use of) the product or service for the remainder of its economic life or to consume the product or service in its own operations. We evaluate the transfer of control primarily from the customer’s perspective as this reduces the risk that revenue is recognized for activities that do not transfer control to the customer.

The majority of our revenue is recognized over time because a customer continuously and simultaneously receives and consumes the benefits of our performance. The exceptions to this pattern are our sales of perpetual and term software licenses, and hardware, where we determined that a customer obtains control of the asset upon delivery, shipment or granting of access. The following table summarizes the pattern of revenue recognition for our most significant performance obligations:

When evaluating our SMA, SaaS and private cloud hosting performance obligations, we noted that these obligations are fulfilled as stand-ready obligations to perform and, therefore, we deem the obligations to be satisfied evenly over time. Client services, such as those relating to implementation, consulting, training or education, are generally not fulfilled evenly over the contract period but rather over a shorter timeline where work effort can rise or decline based upon stages of the project work effort. These client services are typically quoted to a customer as a fixed fee amount that covers the implementation effort. Delivery progress for these services is measured by establishing an approved cost budget with labor hour inputs utilized to gauge percentage of completion of the work effort. Therefore, revenue for our client, education and outsourcing services is recognized proportionally with the progress of the implementation work effort.

Payerpath transaction volume and other transaction-based service obligations, such as revenue cycle management services, are fulfilled over time but are not provided evenly over the contract period and reliable inputs are not available to track progress of completion. We determined that value is provided to the customer throughout the contract period and the pricing charged to the customer varies on a monthly basis, based upon the volume of the customer’s transactions processed in that respective period. The invoiced amount to the customer represents this value and, accordingly, the practical expedient to recognize revenue based upon invoicing is most appropriate.

We considered the specific implementation guidance for accounting for licenses of intellectual property (“IP”) to determine if point in time or over time recognition was more appropriate. The first step in the licensing framework is to determine whether the license is distinct or combined with other goods and services. For most of our software licensing products, the licenses are distinct, with the exception of one of our product offerings under our CareInMotion^TM platform, which requires a significant client service customization. In all instances, we determined that we are offering functional IP as compared with a symbolic IP. Functional IP is a right to use IP because the IP has standalone functionality and a customer can use the IP as it exists at a point in time.

We disaggregate our revenue from contracts with customers based on the type of revenue and nature of revenue stream, as we believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The below tables summarize revenue by type and nature of revenue stream as well as by our reportable segments:

	Three Months Ended June 30, 2018
(In thousands)	Clinical and Financial Solutions		Population Health		Netsmart		Unallocated			Discontinued Operations			Total
Software delivery, support and maintenance	$	235,268	$	50,896	$	51,951	$	(2,073	)	$	364		$	336,406
Client services		154,229		6,172		34,415		(5,732	)		87			189,171
Total revenue	$	389,497	$	57,068	$	86,366	$	(7,805	)	$	451		$	525,577



	Three Months Ended June 30, 2017
(In thousands)	Clinical and Financial Solutions		Population Health		Netsmart		Unallocated			Discontinued Operations			Total
Software delivery, support and maintenance	$	182,811	$	39,021	$	49,548	$	3,653		$	0		$	275,033
Client services		121,300		3,487		28,873		(2,602	)		0			151,058
Total revenue	$	304,111	$	42,508	$	78,421	$	1,051		$	0		$	426,091



	Six Months Ended June 30, 2018
(In thousands)	Clinical and Financial Solutions		Population Health		Netsmart		Unallocated			Discontinued Operations			Total
Software delivery, support and maintenance	$	465,825	$	112,095	$	101,197	$	(908	)	$	(12,037	)	$	666,172
Client services		297,651		14,678		67,655		(8,845	)		2,192			373,331
Total revenue	$	763,476	$	126,773	$	168,852	$	(9,753	)	$	(9,845	)	$	1,039,503



	Six Months Ended June 30, 2017
(In thousands)	Clinical and Financial Solutions		Population Health		Netsmart		Unallocated			Discontinued Operations			Total
Software delivery, support and maintenance	$	361,142	$	78,710	$	96,044	$	7,325		$	0		$	543,221
Client services		239,149		7,227		55,384		(5,415	)		0			296,345
Total revenue	$	600,291	$	85,937	$	151,428	$	1,910		$	0		$	839,566

On ~~July 17, 2017, Netsmart (as defined below) completed~~May 18, 2018, we acquired all the capital stock of Health Grid Holding Company, a Delaware corporation (“Health Grid”), for a total price of $110.0 million, consisting of an initial payment of $60.0 million plus up to an aggregate of $50.0 million in future earnout payments based on Health Grid achieving certain revenue targets over the three years following the acquisition (subject to adjustments for net working capital, cash, debt and transaction expenses). At the time of ~~DeVero, Inc. (“DeVero”),~~closing, we pre-paid $10.0 million of the earnout payments and the remaining contingent consideration of up to $40.0 million was valued at $23.9 million. Health Grid is a ~~healthcare technology company~~patient engagement solutions provider that ~~develops electronic medical record solutions~~assists independent providers, hospitals and health systems to improve patient interactions and satisfaction. We expect to integrate the capabilities of Health Grid into our FollowMyHealth^® platform. The consideration paid for ~~home healthcare and hospice, for an aggregate purchase price of $50.7 million in cash. The purchase price was funded through incremental borrowings under Netsmart’s debt facilities.~~ Health Grid is shown below:

The allocation of the ~~aggregate~~fair value of the consideration transferred as of the acquisition date of May 18, 2018 is as follows: $32.9 million of goodwill; $19.0 million of intangible assets related to customer relationships; $6.9 million of intangible assets related to technology; $2.0 million of cash; other assets of $1.5 million; accounts payable and accrued expenses of $2.3 million; deferred revenue of $0.9 million; and deferred income taxes of $8.4 million.shown in the table below. This allocation is preliminary and subject to changes, which could be significant, as ~~liabilities related to deferred taxes~~appraisals of tangible and intangible assets are finalized, and additional information becomes available. The acquired intangible assets related to technology and customer relationships will be amortized over their estimated useful lives of 7-20 years using a method that approximates the pattern of economic benefits to be gained by the intangible assets. The goodwill is not expected to be deductible for tax purposes.

The following table summarizes the preliminary fair values of the identifiable intangible assets and their estimated useful lives:

We incurred $0.3 million of acquisition costs which are included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the three and six months ended June 30, 2018. The results of operations of ~~DeVero~~Health Grid were not material to our consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~.2018.

On ~~August 25, 2017, the Company~~February 13, 2018, we completed the acquisition of ~~substantially all~~Practice Fusion, Inc., a Delaware corporation (“Practice Fusion”), for aggregate consideration of ~~the assets relating to the provider/patient engagement solutions business of NantHealth, Inc.~~$113.7 million paid in cash. Practice Fusion offers an affordable certified cloud-based electronic health record (“~~NantHealth”~~EHR”). for traditionally hard-to-reach small, independent physician practices. The consideration paid for the transaction included the 15,000,000 shares of common stock of NantHealth that had been held by the Company as available for sale securities and which had a fair value of $42.8 million at the time of the transaction. The transaction also includes adjustments for working capital and deferred revenue obligations, as well as a modification of the commercial agreement between the parties. Total consideration for the transaction was as follows: Practice Fusion is shown below:

The allocation of the fair value of the consideration transferred as of the acquisition date of ~~August 25, 2017~~February 13, 2018 is shown in the table below. This allocation is preliminary and subject to changes, which could be significant, as appraisals of tangible and intangible assets are finalized, and additional information becomes available. The goodwill is not expected to be deductible for tax purposes.

	(In thousands)			(In thousands)
Cash and cash equivalents	$	21		$	14,951
Accounts receivable, net		2,078			13,328
Prepaid expenses and other current assets		1,806			809
Fixed assets		7,099			1,764
Intangible assets		12,400			67,200
Goodwill		9,058			35,329
Other assets		205			43
Accounts payable and accrued expenses		(1,575	)		(7,620	)
Deferred revenue		(9,300	)		(2,400	)
Long-term deferred tax liability					(8,853	)
Other liabilities					(815	)
Net assets acquired	$	21,792		$	113,736

We recorded a $0.6 million measurement period adjustment during the six months ended June 30, 2018, which resulted in an increase in goodwill with an offset to long-term deferred tax liabilities.

The following table summarizes the ~~estimated~~preliminary fair values of the identifiable intangible assets and their estimated useful lives:

	Useful Life	Fair Value		Useful Life	Fair Value
Description	(In years)	(In thousands)		(In years)	(In thousands)
Customer Relationships	19	$	9,200
Customer Relationships - Physician Practices				15	$	28,700
Customer Relationships - Pharmaceutical Partners				20		19,800
Technology	5		3,000	8		14,800
Tradenames	5		200	10		3,900
		$	12,400		$	67,200

We incurred $0.3 million and $0.8 million of acquisition costs which are included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the three and six months ended June 30, 2018. The results of operations of Practice Fusion were not material to our consolidated results of operations for the three and six months ended June 30, 2018.

~~Asset Purchase Agreement with Third Party~~On June 15, 2018, we acquired all the outstanding minority interest in a third party for $6.9 million. We initially acquired a controlling interest in the third party in April 2015. Therefore, this transaction was treated as an equity transaction and the cash payment is reported as part of cash flow from financing activities in the consolidated statement of cash flows for the six months ended June 30, 2018.

On ~~March 31, 2017, Netsmart entered into~~April 2, 2018, Allscripts Healthcare, LLC, a wholly-owned subsidiary of the Company (“Healthcare LLC”) and certain subsidiaries of Healthcare LLC and Hyland Software, Inc., an Ohio corporation (“Hyland”), completed the transactions contemplated by an Asset Purchase Agreement (the “Asset Purchase Agreement”) by which Hyland acquired substantially all of the assets of the Allscripts’ business providing hospitals and health systems document and other content management software and services generally known as “OneContent.” Allscripts acquired the OneContent business during the fourth quarter of 2017 through the acquisition of the EIS Business (as defined below). Certain assets of Allscripts relating to the OneContent business were excluded from the transaction and retained by Allscripts, as described in the Asset Purchase Agreement. In addition, Hyland assumed certain liabilities related to the OneContent business under the terms of the Asset Purchase Agreement. The total consideration for the OneContent business was $260 million, which is subject to certain adjustments for liabilities assumed by Hyland and net working capital as described in the Asset Purchase Agreement. We realized a gain upon sale of $177.9 million which is included in the “Gain on sales of businesses, net” line in our consolidated statements of operations for the three and six months ended June 30, 2018.

On March 15, 2018, we entered into an agreement with a third party to contribute certain assets and liabilities of our Strategic Sourcing business unit, acquired as part of the acquisition of the EIS Business in 2017, into a new entity. We were also obligated to contribute $2.7 million of cash as additional consideration, which was paid during April 2018. In exchange for our contributions, we obtained a 35.7% interest in the new entity, which was valued at $4.0 million and is included in Other assets in our consolidated balance sheet as of June 30, 2018. This investment will be accounted for under the equity method of accounting. As a result of this transaction, we recognized an initial loss of $0.9 million and $4.7 million in additional losses due to measurement period adjustments upon the finalization of carve-out balances, mainly driven by accounts receivable. These losses are included on the “Gain on sale of business, net” line in our consolidated statements of operations for the three and six months ended June 30, 2018, respectively.

On February 6, 2018, we acquired all of the common stock of a cloud-based analytics software platform provider for a purchase price of $8.0 million in cash. The allocation of the consideration is as follows: $3.7 million of intangible assets related to technology; $0.6 million to customer relationships; $4.8 million of goodwill; $0.8 million to accounts receivable; accounts payable of $0.2 million; deferred revenue of $0.6 million and $1.1 million of long-term deferred income tax liabilities. This allocation is preliminary and subject to changes, which could be significant, as appraisals of tangible and intangible assets are finalized, and additional information becomes available. The acquired intangible asset related to technology will be amortized over 8 years using a method that approximates the pattern of economic benefits to be gained from the intangible asset. The customer relationship will be amortized over one year. The goodwill is not deductible for tax purposes. The results of operations of this acquisition were not material to our consolidated results of operations for the three and six months ended June 30, 2018.

On January 31, 2018, Netsmart (as defined below) entered into a Unit Purchase Agreement with a third-party provider of billing solutions, for aggregate ~~cash~~ consideration of ~~$4.0~~$5.4 million, plus net working capital consideration relative to a predetermined target, to acquire ~~intellectual property, certain contractual relationships and certain associates.~~100% of the equity of the entity. This transaction has been accounted for as a business combination. ~~The Asset Purchase Agreement provides for contingent~~Of the total consideration, $2.0 million was paid in cash at closing with the remaining $3.6 million to be paid ~~to the third party based~~evenly on the ~~number~~first and second anniversaries of customers of the third party that migrate to Netsmart’s electronic health record product. The value of the contingent consideration has been estimated to be $0.7 million. Netsmart accrued $0.5 million at September 30, 2017 within other liabilities. This amount represents the discounted fair value of the contingent consideration.closing. This transaction resulted in the preliminary recognition of goodwill of ~~$4.4 million.~~$1.4 million. We recorded a $1.0 million increase in goodwill for a measurement period adjustment with an offset to intangible assets related to customer relationships for the six months ended June 30, 2018. The purchase accounting for this transaction has not yet been completed. The ~~goodwill is expected~~results of operations of this acquisition were not material to ~~be deductible~~our consolidated results of operations for ~~tax purposes. We have finalized~~ the three and six months ended June 30, 2018.

On July 17, 2017, Netsmart completed the acquisition of DeVero, Inc. (“DeVero”), a healthcare technology company that develops electronic medical record solutions for home healthcare and hospice, for an aggregate purchase price of $50.5 million in cash. The allocation of the ~~fair~~purchase price was finalized during the first quarter of 2018.

Acquisition of the Patient/Provider Engagement Solutions Business from NantHealth, Inc.

On August 25, 2017, the Company completed the acquisition of substantially all of the assets relating to the provider/patient engagement solutions business of NantHealth, Inc. (“NantHealth”). During the six months ended June 30, 2018, measurement period adjustments to the purchase price allocation were recorded which resulted in an increase in goodwill of $0.1 million. At June 30, 2018 the purchase price allocation remains subject to further adjustment, primarily related to the finalization of the net working capital acquired.

Acquisition of the Enterprise Information Solutions Business from McKesson Corporation

On October 2, 2017, Healthcare LLC completed the acquisition of McKesson Corporation’s Enterprise Information Solutions Business division (the “EIS Business”), which provides certain software solutions and services to hospitals and health systems, by acquiring all of the outstanding equity interests of two indirect, wholly-owned subsidiaries of McKesson Corporation. The acquisition of the EIS Business was based on a total enterprise value of $185 million. During the ~~consideration transferred as~~six months ended June 30, 2018, measurement period adjustments to the purchase price allocation were recorded which resulted in an increase in goodwill of ~~September~~$39.3 million, primarily resulting from an increase in deferred revenue of $44.0 million; a decrease in current assets of $0.6; an increase in accrued expenses of $0.6; and an increase in tax liabilities of $0.4 partially offset by increases in identified intangible assets of $6.6 million. At June 30, ~~2017~~.

~~2016 Business Combinations Update~~2018 the purchase price allocation remains subject to further adjustment, primarily with respect to certain acquired intangible assets and deferred revenue.

On March 20, 2016, we entered into a Contribution and Investment Agreement with GI Netsmart Holdings LLC, a Delaware limited liability company (“GI Partners”), to form a joint business entity to which we contributed our Homecare^TM business and GI Partners made a cash contribution. On April 19, 2016, the joint business entity acquired Netsmart, Inc., a Delaware corporation. As a result of these transactions (the “Netsmart Transaction”), the joint business entity combined the Allscripts Homecare^TM business with Netsmart, Inc. Throughout the rest of this Form 10-Q, the joint business entity is referred to as “Netsmart”. As part of the Netsmart Transaction, we deposited $15 million in an escrow account to be used by Netsmart to facilitate the integration of our Homecare^TM business within Netsmart over the next five years, at which time the restriction on any unused funds will lapse. As of ~~September~~June 30, ~~2017,~~2018, there is ~~$11.3~~$7.9 million remaining in the escrow account. ~~Our Form 10-K includes a detailed discussion about the Netsmart Transaction.~~ We finalized the allocation of the fair value of the consideration transferred as of December 31, 2016.

On October 27, 2016, Netsmart completed the acquisition of HealthMEDX, LLC, a Delaware limited liability company (“HealthMEDX”), for an aggregate consideration of $39.2 million. HealthMEDX is a provider of electronic medical record solutions for long-term and post-acute care including continuing care retirement communities, assisted living, independent living, skilled nursing and home care providers. During the three months ended March 31, 2017, we finalized the allocation of the fair value of the consideration transferred and recorded a measurement period adjustment of $0.1 million related to the fair value of liabilities with an offset to goodwill.

~~During the second quarter of 2017 we recorded final measurement period adjustments against goodwill related to the Company’s acquisitions of third parties during the fourth quarter of 2016.~~

The supplemental pro forma results below ~~for the three and nine months ended September 30, 2017 and 2016~~ were calculated after applying our accounting policies and adjusting the results of ~~NantHealth’s provider /patient engagement solutions business~~the EIS Business and NantHealth to reflect (i) the additional amortization ~~of acquired intangible assets and (ii) the additional amortization of the estimated adjustment to decrease the assumed deferred revenue obligations to fair value,~~ that would have been recognized assuming the acquisition occurred on January 1, 2016, together with the consequential tax effects. The supplemental pro forma results were also adjusted to exclude acquisition-related and transaction costs incurred during the 2017 period. The revenue and net loss of NantHealth’s provider/patient solutions business since August 25, 2017 are included in our consolidated statement of operations for the three and nine months ended September 30, 2017.

The supplemental pro forma results below for the three and nine months ended September 30, 2016 were calculated after applying our accounting policies and adjusting the results of Netsmart and HealthMEDX to reflect (i) the additional depreciation and amortization that would have resultedcharged resulting from the fair value adjustments to ~~property, plant and equipment and~~ intangible assets, (ii) the additional interest expense associated with ~~Netsmart’s~~Allscripts’ borrowings under ~~new term loans~~its revolving facility, and (iii) the additional amortization of the estimated adjustment to decrease the assumed deferred revenue obligations to fair value that would have been ~~recognized~~recorded assuming both acquisitions occurred on January 1, ~~2015,~~2016, together with the consequential tax effects. The supplemental pro forma results were also adjusted to exclude acquisition-related and transaction costs incurred during the 2016 period. The effects of transactions between Allscripts and Netsmart during the periods presented have been eliminated in the supplemental pro forma data.

The revenue and ~~net loss~~earnings of ~~Netsmart~~the EIS Business, since ~~April 19, 2016~~October 2, 2017, and NantHealth, since August 25, 2017, are included in our consolidated statement of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~ The consolidated statements of operations for the three and nine months ended September 30, 2016 do not include any actual revenue and earnings from HealthMEDX since this acquisition was completed on October 27, 2016.

2018. The below supplemental pro forma ~~data for~~revenue and net loss of the combined entity is presented ~~under the assumption that the Netsmart and HealthMEDX~~as if both acquisitions had occurred on January 1, ~~2015 and the NantHealth provider/patient solutions business acquisition occurred on January 1,~~ 2016. The three and nine months ended September 30, 2017 only reflect pro forma adjustments related to the NantHealth provider/patient solutions business, as Netsmart and HealthMEDX are included for the full 2017 periods.

(In thousands, except per share amounts)	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016			Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Actual from Netsmart since acquisition date of April 19, 2016:
Revenue							$	52,621			$	96,855
Net loss							$	(11,126	)		$	(18,239	)

Actual from NantHealth since acquisition date of August 25, 2017:
Revenue	$	648		$	0		$	648			$	0
Net loss	$	(628	)	$	0		$	(628	)		$	0
										��
Supplemental pro forma data for combined entity:
Revenue	$	451,142		$	1,296,008		$	403,741			$	1,229,471		$	524,263		$	1,045,073
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	(27,260	)	$	(223,449	)	$	(14,799	)		$	(66,220	)	$	(163,614	)	$	(181,186	)
Loss per share, basic and diluted	$	(0.15	)	$	(1.24	)	$	(0.08	)		$	(0.35	)	$	(0.90	)	$	(1.00	)

Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. ~~Our~~We held no Level 1 financial instruments ~~included our investment in NantHealth common stock. Refer to Note 11,~~ ~~“Other Comprehensive Income,”~~ ~~for further information regarding our available for sale marketable securities.~~at June 30, 2018 or December 31, 2017.

Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Our Level 2 derivative financial instruments include foreign currency forward contracts valued based upon observable values of spot and forward foreign currency exchange rates. Refer to Note 10, “Derivative Financial Instruments,” for further information regarding these derivative financial instruments.

Level 3: Unobservable inputs that are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Our Level 3 financial instruments include derivative financial instruments comprising the 1.25% Call Option asset and the 1.25% embedded cash conversion option liability that are not actively traded. These derivative instruments were designed with the intent that changes in their fair values would substantially offset, with limited net impact to our earnings. Therefore, we believe the sensitivity of changes in the unobservable inputs to the option pricing model for these instruments is substantially mitigated. Refer to Note 10, “Derivative Financial Instruments,” for further information regarding these derivative financial instruments. The sensitivity of changes in the unobservable inputs to the valuation pricing model used to value these instruments is not material to our consolidated results of operations. Our Level 3 financial liabilities also include the estimated fair value of contingent consideration related to completed acquisitions. The fair values are based on discounted cash flow analyses reflecting the possible achievement of specified performance measures or events and captures the contractual nature of the contingencies, commercial risk and the time value of money. The largest contingent consideration amount relates to Health Grid and was valued at $23.9 million at June 30, 2018.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of the respective balance sheet dates:

	Balance Sheet	September 30, 2017										December 31, 2016										Balance Sheet	June 30, 2018										December 31, 2017
(In thousands)	Classifications	Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3			Total			Classifications	Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3			Total
NantHealth Common Stock	Available for sale marketable securities	$	0	$	0	$	0		$	0		$	149,100	$	0	$	0		$	149,100
1.25% Call Option	Other assets		0		0		44,882			44,882			0		0		17,080			17,080		Other assets	$	0	$	0	$	18,428		$	18,428		$	0	$	0	$	46,578		$	46,578
1.25% Embedded cash conversion option	Other liabilities		0		0		(45,973	)		(45,973	)		0		0		(17,659	)		(17,659	)	Other liabilities		0		0		(19,404	)		(19,404	)		0		0		(47,777	)		(47,777	)
Foreign exchange derivative assets	Prepaid expenses and other current assets		0		1,362		0			1,362			0		1,021		0			1,021		Prepaid expenses and other current assets		0		42		0			42			0		1,136		0			1,136
Contingent consideration																						Accrued expenses		0		0		10,901			10,901			0		0		3,197			3,197
Contingent consideration																						Other liabilities		0		0		17,486			17,486			0		0		2,145			2,145
Total		$	0	$	1,362	$	(1,091	)	$	271		$	149,100	$	1,021	$	(579	)	$	149,542			$	0	$	42	$	27,411		$	27,453		$	0	$	1,136	$	4,143		$	5,279

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis at June 30, 2018 are summarized as follows:

The following table summarizes our long-term equity investments which are included in other assets in the accompanying consolidated balance sheets:

	Number of								Number of
	Investees		Original		Carrying Value at				Investees		Original		Carrying Value at
(In thousands, except # of investees)	at September 30, 2017		Investment		September 30, 2017		December 31, 2016		at June 30, 2018		Investment		June 30, 2018		December 31, 2017
Equity method investments ⁽¹⁾		3	$	1,658	$	4,142	$	2,436		4	$	5,658	$	7,965	$	3,258
Cost method investments		7		32,784		26,572		26,041		8		32,970		14,601		26,755
Total equity investments		10	$	34,442	$	30,714	$	28,477		12	$	38,628	$	22,566	$	30,013

As of ~~September~~June 30, ~~2017,~~2018, it is not practicable to estimate the fair value of our non-marketable cost and equity method investments primarily because of their illiquidity and restricted marketability. The factors we considered in trying to determine fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations, ~~and~~ the issuer’s subsequent or planned raises of ~~capital.~~capital, and observable price changes in orderly transactions.

Each quarter, management performs an assessment of each of our equity investments on an individual basis to determine if there have been any declines in fair ~~value are other than temporary.~~ ~~Based on management's assessment~~ ~~during the second quarter of 2017~~, the Company determined that the decline in fair value of our available for sale marketable securities was other than temporary based on a number of factors, including, but not limited to, uncertainty regarding our intent to hold these investments for a period of time that would be sufficient to recover our cost basis in the event of a market recovery, the fact that the fair value of each investment had continued to decline below cost over the period held, and the Company's uncertainty around the near-term prospects for certain of the investments. value. As a result ~~the Company~~of these assessments, we recognized ~~other-than-temporary~~non-cash impairment charges of ~~$142.2~~$10.0 million ~~on available for sale marketable securities~~and $15.5 million during the ~~second quarter~~three and six months ended June 30, 2018 related to two of ~~2017.~~ ~~The~~our cost-method equity investments and a related note receivable. These charges equaled the cost ~~basis~~bases of ~~these marketable securities~~the investments and the related note receivable prior to ~~recognizing~~ the ~~impairment charges~~

~~was approximately $205.6 million.~~impairment. The ~~Company determined the fair value of these securities based on Level 1 inputs.~~ During the three months ended September 30, 2017, the Company recognized an additional $20.7 million loss upon the final disposition of these securities in connection with the NantHealth provider/patient solutions business acquisition (refer to Note 2, “Business Combinations”). In addition, the Company recognized other-than-temporary impairment charges of $2.1 million on a cost method equity investment during the nine months ended September 30, 2017. ~~The aggregate carrying value of this equity investment prior to recognizing the impairment charge was $2.1 million.~~ ~~These~~non-cash impairment charges are included in ~~impairment~~the “Impairment of and losses on long-term ~~investments~~investments” line in our consolidated ~~statement~~statements of operations for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017.~~ 2018.

Our long-term financial liabilities include amounts outstanding under our senior secured credit facility and Netsmart’s Credit Agreements (as defined in Note 8, “Debt”), with carrying values that approximate fair value since the interest rates approximate current market rates. In addition, the carrying amount of our 1.25% Cash Convertible Senior Notes (the “1.25% Notes”) approximates fair value as ~~September~~June 30, ~~2017,~~2018, since the effective interest rate on the 1.25% Notes approximates current market rates. See Note 8, “Debt,” for further information regarding our long-term financial liabilities.

Stock-based compensation expense recognized during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 is included in our consolidated statements of operations as shown in the below table. Stock-based compensation expense includes both non-cash expense related to grants of stock-based awards as well as cash expense related to the employee discount applied to purchases of our common stock under our employee stock purchase plan. In addition, the three and ~~nine months~~six month periods ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 include stock-based compensation expense related to Netsmart’s time-based liability classified option awards. No stock-based compensation costs were capitalized during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Cost of revenue:
Software delivery, support and maintenance	$	378	$	979	$	2,491	$	3,209	$	451	$	988	$	1,067	$	2,113
Client services		899		884		3,464		3,512		1,140		993		2,576		2,565
Total cost of revenue		1,277		1,863		5,955		6,721		1,591		1,981		3,643		4,678
Selling, general and administrative expenses		7,193		6,464		17,793		17,972		6,464		7,050		13,709		10,600
Research and development		1,934		1,446		6,643		6,141		2,126		2,120		4,967		4,709
Total stock-based compensation expense	$	10,404	$	9,773	$	30,391	$	30,834	$	10,181	$	11,151	$	22,319	$	19,987

We measure stock-based compensation expense at the grant date based on the fair value of the award. We recognize the expense for service-based share awards over the requisite service period on a straight-line basis, net of estimated forfeitures. We recognize the expense for performance-based and market-based share awards over the vesting period under the accelerated attribution method, net of estimated forfeitures. In addition, we recognize stock-based compensation cost for awards with performance conditions if and when we conclude that it is probable that the performance conditions will be achieved.

The fair value of service-based and performance-based restricted stock units is measured at the underlying closing share price of our common stock on the date of grant. The fair value of market-based restricted stock units is measured using the Monte Carlo pricing model. No stock options were granted during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017.

	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017				Three Months Ended June 30, 2018				Six Months Ended June 30, 2018
			Weighted-Average				Weighted-Average				Weighted-Average				Weighted-Average
			Grant Date				Grant Date				Grant Date				Grant Date
(In thousands, except per share amounts)	Shares		Fair Value		Shares		Fair Value		Shares		Fair Value		Shares		Fair Value
Service-based restricted stock units		11	$	13.73		1,908	$	12.38		2,168	$	12.09		3,468	$	12.87
Performance-based restricted stock units with a service condition		38	$	13.25		610	$	12.01		0	$	0.00		524	$	15.74
Market-based restricted stock units with a service condition		0	$	0.00		613	$	13.34		0	$	0.00		0	$	0.00
		49	$	13.36		3,131	$	12.50		2,168	$	12.09		3,992	$	13.25

During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018, and the year ended December 31, ~~2016, 1.2~~2017, 1.4 million and ~~1.5~~1.3 million shares of common stock, respectively, were issued in connection with the exercise of options and the release of restrictions on stock awards.

Upon vesting, restricted stock units are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock. The majority of restricted stock units and awards that vested during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and year ended December 31, ~~2016~~2017 were net-share settled such that we withheld shares with fair value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total payments for the employees' minimum statutory tax obligations to the taxing authorities are reflected as a financing activity within the accompanying consolidated statements of cash flows. The total shares withheld for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017 ~~and 2016~~ were ~~569~~618 thousand and ~~572~~552 thousand, respectively, and were based on the value of the restricted stock units on their vesting date as determined by our closing stock price. These net-share settlements had the effect of share repurchases by us as they reduced the number of shares that would have otherwise been issued as a result of the vesting.

On November 17, 2016, we announced that our Board approved a stock purchase program under which we may repurchase up to $200 million of our common stock through December 31, 2019. ~~During the three and nine months ended September 30, 2017, we~~We repurchased ~~0.0~~3.6 million ~~and 1.0 million~~ shares ~~respectively,~~ of our common stock under the program for a total of $44.3 million during the three months ended June 30, 2018. We repurchased 7.7 million shares of our common stock under the program for a total of $101.9 million during the six months ended June 30, 2018. During the three and six months ended June 30, 2017, we repurchased 1.0 million shares of our common stock under the new program for a total of $12.1 million. The approximate dollar value of shares that may yet be purchased under the program as of ~~September~~June 30, ~~2017~~2018 was ~~$163.9~~$62.2 million. Any future stock repurchase transactions may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means, subject to market conditions. Any repurchase activity will depend on many factors such as our working capital needs, cash requirements for investments, debt repayment obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

Stock-based compensation expense related to Netsmart’s time-based liability classified option awards totaled $1.2 million and $2.4 million, respectively, during the three and six months ended June 30, 2018. Stock-based compensation expense (benefit) related to Netsmart’s time-based liability classified option awards ~~was included in~~totaled $0.5 million and ($3.0) million during the ~~following categories in our consolidated statements of operations:~~

At June 30, 2018, the liability for outstanding awards was ~~$5.2~~$10.4 million. As of ~~September~~June 30, ~~2017~~2018 the weighted average fair value per option unit using the Black‑Scholes‑Merton option pricing model was estimated at ~~$0.23,~~$0.30, as compared to $0.54 at December 31, 2016. A significant portion of the decrease in fair value occurred during the first quarter of 2017 and resulted in the reversal of previously recognized stock-based compensation expense during the three months ended March 31, 2017, as required under the liability method of accounting.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, 3.3 million~~2018, 389 option unit awards were granted by ~~Netsmart . Of the 3.3 million unit awards granted, 2.1 million were time-based and 1.2 million were performance-based. These options were issued at an exercise price of $1.00.~~Netsmart.

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average shares of common stock outstanding. For purposes of calculating diluted earnings (loss) per share, the denominator includes both the weighted average shares of common stock outstanding and dilutive common stock equivalents. Dilutive common stock equivalents consist of stock options, restricted stock unit awards and warrants calculated under the treasury stock method.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In thousands, except per share amounts)

2017

2016

2017

2016

Basic Loss per Common Share:

Net (loss) income

$
(17,462
)

$
157

$
(169,038
)

$
148

Less: Net income attributable to non-controlling interests

(163
)

(151
)

(352
)

(142
)
Less: Accretion of redemption preference on redeemable
   convertible non-controlling interest - Netsmart

(10,962
)

(10,191
)

(32,887
)

(18,344
)
Net loss attributable to Allscripts Healthcare Solutions, Inc.
   stockholders

$
(28,587
)

$
(10,185
)

$
(202,277
)

$
(18,338
)

Weighted-average common shares outstanding

180,634

186,226

180,864

187,190

Basic Loss per Common Share

$
(0.16
)

$
(0.06
)

$
(1.12
)

$
(0.10
)

Diluted Loss per Common Share:

Net (loss) income

$
(17,462
)

$
157

$
(169,038
)

$
148

Less: Net income attributable to non-controlling interests

(163
)

(151
)

(352
)

(142
)
Less: Accretion of redemption preference on redeemable
   convertible non-controlling interest - Netsmart

(10,962
)

(10,191
)

(32,887
)

(18,344
)
Net loss attributable to Allscripts Healthcare Solutions, Inc.
   stockholders

$
(28,587
)

$
(10,185
)

$
(202,277
)

$
(18,338
)

Weighted-average common shares outstanding

180,634

186,226

180,864

187,190

Plus: Dilutive effect of stock options, restricted stock unit
   awards and warrants

0

0

0

0

Weighted-average common shares outstanding assuming
   dilution

180,634

186,226

180,864

187,190

Diluted Loss per Common Share

$
(0.16
)

$
(0.06
)

$
(1.12
)

$
(0.10
)

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share amounts)	2018			2017			2018			2017
Basic earnings (loss) per Common Share:
Income (loss) from continuing operations, net of tax	$	74,956		$	(143,011	)	$	42,026		$	(151,576	)
Less: Net loss (income) attributable to non-controlling interests		2,700			264			3,490			(189	)
Less: Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart		(12,148	)		(10,963	)		(24,297	)		(21,925	)
Net income (loss) from continuing operations attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	65,508		$	(153,710	)	$	21,219		$	(173,690	)
Net (loss) income from discontinued operations attributable to Allscripts Healthcare Solutions, Inc. stockholders		(684	)		0			3,731			0
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	64,824		$	(153,710	)	$	24,950		$	(173,690	)

Weighted-average common shares outstanding		176,363			181,193			178,113			180,981

Basic earnings (loss) from continuing operations per Common Share	$	0.36		$	(0.85	)	$	0.11		$	(0.96	)
Basic income from discontinued operations per Common Share		0.00			0.00			0.03			0.00
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per Common Share	$	0.36		$	(0.85	)	$	0.14		$	(0.96	)

Diluted earnings (loss) per Common Share:
Income (loss) from continuing operations, net of tax	$	74,956		$	(143,011	)	$	42,026		$	(151,576	)
Less: Net loss (income) attributable to non-controlling interests		2,700			264			3,490			(189	)
Less: Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart		(12,148	)		(10,963	)		(24,297	)		(21,925	)
Net income (loss) from continuing operations attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	65,508		$	(153,710	)	$	21,219		$	(173,690	)
Net (loss) income from discontinued operations attributable to Allscripts Healthcare Solutions, Inc. stockholders		(684	)		0			3,731			0
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	64,824		$	(153,710	)	$	24,950		$	(173,690	)

Weighted-average common shares outstanding		176,363			181,193			178,113			180,981
Plus: Dilutive effect of stock options, restricted stock unit awards and warrants		2,963			0			3,334			0
Weighted-average common shares outstanding assuming dilution		179,326			181,193			181,447			180,981

Diluted earnings (loss) from continuing operations per Common Share	$	0.36		$	(0.85	)	$	0.11		$	(0.96	)
Diluted income from discontinued operations per Common Share		0.00			0.00			0.03			0.00
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders per Common Share	$	0.36		$	(0.85	)	$	0.14		$	(0.96	)

As a result of the net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders for the three and ~~nine~~six months ended ~~September~~June 30, 2017, ~~and 2016,~~ we used basic weighted-average common shares outstanding in the calculation of diluted loss per share for ~~that period,~~those periods, since the inclusion of any stock equivalents would be anti-dilutive.

The following stock options, restricted stock unit awards and warrants are not included in the computation of diluted earnings (loss) per share as the effect of including such stock options, restricted stock unit awards and warrants in the computation would be anti-dilutive:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

June 30,

Six Months Ended

June 30,

(In thousands)

2017

2016

2017

2016

2018

2017

2018

2017

Shares subject to anti-dilutive stock options, restricted stock

unit awards and warrants excluded from calculation

26,085

27,580

26,636

26,219

26,044

26,652

24,318

26,668

	September 30, 2017							December 31, 2016							June 30, 2018							December 31, 2017
	Gross							Gross							Gross							Gross
	Carrying		Accumulated			Intangible		Carrying		Accumulated			Intangible		Carrying		Accumulated			Intangible		Carrying		Accumulated			Intangible
(In thousands)	Amount		Amortization			Assets, Net		Amount		Amortization			Assets, Net		Amount		Amortization			Assets, Net		Amount		Amortization			Assets, Net
Intangibles subject to amortization:
Proprietary technology	$	638,118	$	(388,913	)	$	249,205	$	627,819	$	(347,477	)	$	280,342	$	706,556	$	(434,375	)	$	272,181	$	695,354	$	(405,114	)	$	290,240
Customer contracts and relationships		843,458		(454,430	)		389,028		813,021		(430,960	)		382,061		975,220		(487,228	)		487,992		922,492		(464,860	)		457,632
Total	$	1,481,576	$	(843,343	)	$	638,233	$	1,440,840	$	(778,437	)	$	662,403	$	1,681,776	$	(921,603	)	$	760,173	$	1,617,846	$	(869,974	)	$	747,872

Intangibles not subject to amortization:
Registered trademarks						$	79,000						$	79,000						$	79,000						$	79,000
Goodwill							1,971,950							1,924,052							2,107,818							2,004,953
Total						$	2,050,950						$	2,003,052						$	2,186,818						$	2,083,953

Changes in the carrying amounts of goodwill by reportable segment for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 were as follows:

Clinical and

Population

(In thousands)

Financial Solutions

Health

Netsmart

Total

Balance as of December 31, 2016

$
843,837

$
404,875

$
675,340

$
1,924,052

DeVero acquisition

0

0

32,943

32,943

Nanthealth provider/patient solutions business

0

9,058

0

9,058

Other additions

405

47

4,503

4,955

Foreign exchange translation

942

0

0

942

Balance as of September 30, 2017

$
845,184

$
413,980

$
712,786

$
1,971,950

	Clinical and			Population
(In thousands)	Financial Solutions			Health			Netsmart		Total
Balance as of December 31, 2017	$	861,615		$	431,132		$	712,206	$	2,004,953
Additions arising from business acquisitions:
Practice Fusion		34,739			0			0		34,739
Health Grid		0			53,747			0		53,747
Other acquisitions		4,829			0			1,374		6,203
Total arising from business acquisitions		39,568			53,747			1,374		94,689
Increases (decreases) due to measurement period adjustments:
Practice Fusion		590			0			0		590
NantHealth provider/patient solutions business		0			117			0		117
Enterprise Information Solutions business		28,068			11,257			0		39,325
Other measurement period adjustments		(337	)		0			1,148		811
Total increases (decreases) due to measurement period adjustments:		28,321			11,374			1,148		40,843
Total additions to goodwill		67,889			65,121			2,522		135,532
Divestitures		(30,107	)		(2,199	)		0		(32,306	)
Foreign exchange translation		(361	)		0			0		(361	)
Balance as of June 30, 2018	$	899,036		$	494,054		$	714,728		2,107,818

There were no accumulated impairment losses associated with our goodwill as of ~~September~~June 30, ~~2017~~2018 or December 31, ~~2016.~~2017.

~~Additions~~Other additions during the ~~third quarter~~first six months of ~~2017~~2018 include ~~goodwill of $9.1~~$4.8 million arising from Allscripts’ purchase of ~~NantHealth’s provider/patient engagement solutions business~~a cloud-based analytics software platform provider, and ~~$32.9~~$1.4 million arising from Netsmart’s acquisition of ~~DeVero. Other additions during the nine months ended September 30, 2017 include additions arising from Netsmart’s Asset Purchase Agreement with~~ a third party ~~and~~provider of billing solutions, which also had a subsequent measurement period ~~adjustments against goodwill~~adjustment of $1.0 million with an offset to intangible assets related to customer relationships. Goodwill was reduced by $2.2 million due to the divestiture of our strategic sourcing business unit, and by $30.1 million related to the ~~Company’s acquisitions of third parties in late 2016.~~OneContent divestiture. Refer to Note 2,3, “Business Combinations,” for additional information regarding these transactions.

~~We incurred the following asset and long-term investment impairment charges:~~

~~During~~Effective January 1, 2018, we made organizational changes that affected our Clinical and Financial Solutions and Population Health reportable segments. Refer to Note 14, “Business Segments” for additional information. As a result of these changes, the ~~first quarter~~dbMotion business unit, formerly included in the Population Health operating segment within the Population Health reportable segment, is now aligned with the Hospitals and Health Systems operating segment within the Clinical and Financial solutions reportable segment.

We performed our annual goodwill impairment test as of ~~2016, we incurred non-cash asset~~October 1, 2017, our annual testing date, and again as of January 1, 2018 in connection with the organizational changes referred to above. While there was no impairment ~~charges which included $2.2 million for the impairment of capitalized software~~indicated as a result of the January 1, 2018 test, the estimated fair value of our ~~decision~~Hospitals and Health Systems reporting unit exceeded the unit’s carrying value by 10%. As of March 31, 2018, the goodwill allocated to ~~discontinue several software development projects, $2.1 million~~the Hospitals and Health Systems reporting unit was $511.2 million. The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples, and an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs. Under the income approach, we determine fair value based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections, which are dependent on sales to new and existing clients, new product introductions, client behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units. Because the fair value of the Hospitals and Health Systems reporting unit was not substantially in excess of its carrying value at January 1, 2018, there is an increased risk that any adverse trends in the foregoing assumptions with respect to the Hospitals and Health Systems reporting unit could cause the estimated fair value to fall below the carrying value, which would result in a material impairment of ~~one of our cost method equity investments, and other charges of $0.4 million to write down a long-term asset to its estimated net realizable value.~~the reporting unit’s goodwill.

During the nine months ended September 30, 2017, we recognized non-cash charges of $165.3 million including other than temporary impairment charges of $144.6 million during the second quarter of 2017 associated with two of the Company’s long-term investments based on management’s assessment of the likelihood of near-term recovery of the investments’ value. The majority of the impairment charges relate to our investment in NantHealth common stock. Refer to Note 3, “Fair Value Measurements and Long-term Investments” and Note 11, “Other Comprehensive Income,” for further information regarding these impairments. During the three months ended September 30, 2017, we realized an additional $20.7 million loss upon the final disposition of the NantHealth common stock. Refer to Note 2, “Business Combinations,” for information regarding the divestiture of our investment in NantHealth common stock in connection with our acquisition of certain assets related to NantHealth’s provider/patient engagement solutions business.

	September 30, 2017						December 31, 2016						June 30, 2018						December 31, 2017
(In thousands)	Principal Balance		Unamortized Discount and Debt Issuance Costs		Net Carrying Amount		Principal Balance		Unamortized Discount and Debt Issuance Costs		Net Carrying Amount		Principal Balance		Unamortized Discount and Debt Issuance Costs		Net Carrying Amount		Principal Balance		Unamortized Discount and Debt Issuance Costs		Net Carrying Amount
1.25% Cash Convertible Senior Notes	$	345,000	$	39,319	$	305,681	$	345,000	$	49,186	$	295,814	$	345,000	$	29,129	$	315,871	$	345,000	$	35,978	$	309,022
Senior Secured Credit Facility		470,000		3,690		466,310		441,875		4,691		437,184		693,750		6,979		686,771		628,750		3,360		625,390
Netsmart Non-Recourse Debt:
First Lien Term Loan		480,533		11,482		469,051		432,925		11,655		421,270		476,883		9,892		466,991		479,316		10,950		468,366
Second Lien Term Loan		167,000		7,789		159,211		167,000		8,901		158,099		167,000		6,676		160,324		167,000		7,418		159,582
Other debt		0		0		0		13		0		13
Total debt	$	1,462,533	$	62,280	$	1,400,253	$	1,386,813	$	74,433	$	1,312,380	$	1,682,633	$	52,676	$	1,629,957	$	1,620,066	$	57,706	$	1,562,360
Less: Debt payable within one year - excluding Netsmart		25,000		450		24,550		15,638		480		15,158		20,000		491		19,509		28,125		438		27,687
Less: Debt payable within one year - Netsmart		4,866		2,117		2,749		4,351		1,900		2,451		4,866		2,100		2,766		4,866		2,111		2,755
Total long-term debt, less current maturities	$	1,432,667	$	59,713	$	1,372,954	$	1,366,824	$	72,053	$	1,294,771	$	1,657,767	$	50,085	$	1,607,682	$	1,587,075	$	55,157	$	1,531,918

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Interest expense	$	5,577	$	3,896	$	15,079	$	11,029	$	8,146	$	4,668	$	16,084	$	9,502
Amortization of discounts and debt issuance costs		3,674		3,522		10,867		10,401		3,834		3,612		7,590		7,193
Netsmart:
Interest expense ⁽¹⁾		12,107		11,019		34,188		19,549		13,575		11,164		26,026		22,081
Amortization of discounts and debt issuance costs		894		930		2,588		1,778		899		846		1,800		1,694
Total interest expense	$	22,252	$	19,367	$	62,722	$	42,757	$	26,454	$	20,290	$	51,500	$	40,470

Interest expense related to the 1.25% Notes, included in the table above, consists of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017		2016		2018		2017		2018		2017
Coupon interest at 1.25%	$	1,078	$	1,078	$	3,234	$	3,234		1,078	$	1,078	$	2,156	$	2,156
Amortization of discounts and debt issuance costs		3,342		3,185		9,866		9,401		3,442		3,278		6,849		6,524
Total interest expense related to the 1.25% Notes	$	4,420	$	4,263	$	13,100	$	12,635	$	4,520	$	4,356	$	9,005	$	8,680

On February 15, 2018, Allscripts and Healthcare LLC entered into a Second Amended and Restated Credit Agreement (the “Second Amended Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), the several banks and other financial institutions or entities from time to time party thereto, and Fifth Third Bank, KeyBank National Association, SunTrust Bank and Wells Fargo Bank, National Association, as syndication agents, amending and restating the Amended and Restated Credit Agreement, dated September 30, 2015, as amended on March 28, 2016 and December 22, 2016 (the “Existing Credit Agreement”). The Second Amended Credit Agreement provides for a $400 million senior secured term loan (an increase from the $250 million term loan provided under the Existing Credit Agreement) (the “Term Loan”) and a $900 million senior secured revolving facility (an increase from the $550 million revolving facility provided under the Existing Credit Agreement) (the “Revolving Facility”), each with a five-year term. The Term Loan is repayable in quarterly installments commencing on June 30, 2018. A total of up to $50 million of the Revolving Facility is available for the issuance of letters of credit, up to $10 million of the Revolving Facility is available for swingline loans, and up to $100 million of the Revolving Facility could be borrowed under certain foreign currencies. Proceeds from the borrowings under the Second Amended Credit Agreement were used for the refinancing of indebtedness under the Existing Credit Agreement.

The proceeds of the Revolving Facility can be used to finance Allscripts’ working capital needs and for general corporate purposes, including, without limitation, financing of permitted acquisitions, and for share repurchases. Allscripts is also permitted to add one or more incremental revolving and/or term loan facilities in an aggregate amount of up to $600 million, subject to certain conditions (an increase from the $300 million incremental facility permitted under the Existing Credit Agreement).

The initial applicable interest rate margin for Base Rate borrowings is 1.00%, and for Eurocurrency Rate borrowings is 2.00%. On and after September 30, 2018, the interest rate margins will be determined from a pricing table and will depend upon Allscripts’ total leverage ratio. The applicable margins for Base Rate borrowings under the Second Amended Credit Agreement range from 0.50% to 1.25% depending on Allscripts’ total leverage ratio (as compared to the 0.00% to 1.25% range provided under the Existing Credit Agreement). The applicable margins for Eurocurrency Rate loans range from 1.50% to 2.25%, depending on Allscripts’ total leverage ratio (as compared to the 1.00% to 2.25% range provided under the Existing Credit Agreement).

As of ~~September~~June 30, ~~2017, $225.0~~2018, $395.0 million under ~~a term loan, $245.0~~the Term Loan, $298.8 million under ~~our revolving credit facility,~~the Revolving Facility, and $0.8 million in letters of credit were outstanding under ~~our senior secured credit facility.~~the Second Amended Credit Agreement.

As of ~~September~~June 30, ~~2017,~~2018, the interest rate on the borrowings under ~~our senior secured credit facility~~the Second Amended Credit Agreement was LIBOR plus ~~2.25%~~2.00%, which totaled ~~3.49%~~4.09%. We were in compliance with all covenants under the ~~senior secured credit facility agreement~~Second Amended Credit Agreement as of ~~September~~June 30, ~~2017.~~2018.

As of ~~September~~June 30, ~~2017,~~2018, we had ~~$304.2~~$600.4 million available, net of outstanding letters of credit, under our ~~revolving credit facility.~~Revolving Facility. There can be no assurance that we will be able to draw on the full available balance of our ~~revolving credit facility~~Revolving Facility if the financial institutions that have extended such credit commitments become unwilling or unable to fund such borrowings. Refer to Note 15, “Subsequent Events,” for information regarding an additional borrowing of $185.0 million under our revolving credit facility to fund a business acquisition that occurred subsequent to September 30, 2017.

As of ~~September~~June 30, ~~2017,~~2018, the if-converted value of the 1.25% Notes did not exceed the 1.25% Notes’ principal amount.

As of ~~September~~June 30, ~~2017, $480.5~~2018, $476.9 million under the Netsmart First Lien Term Loan, $167.0 million under the Netsmart Second Lien Term Loan and no amounts under the Netsmart Revolving Facility (collectively, the ~~“Credit~~“Netsmart Credit Agreements”) were outstanding.

As of ~~September~~June 30, ~~2017,~~2018, the interest rate on the borrowings under the Netsmart First Lien Term Loan was Adjusted LIBO plus 4.50%, which totaled ~~5.83%~~6.57%, the interest rate on the borrowings under the Netsmart Second Lien Term Loan was Adjusted LIBO plus 9.50%, which totaled ~~10.82%~~11.57%, and the interest rate on the borrowings under the Netsmart Revolving Facility was Adjusted LIBO plus 4.75%, which totaled ~~6.08%~~6.82%. Netsmart was in compliance with all covenants under its Netsmart Credit Agreements as of ~~September~~June 30, ~~2017.~~2018.

As of ~~September~~June 30, ~~2017,~~2018, Netsmart had $50.0 million available, with no outstanding letters of credit commitments, under the Netsmart Revolving Facility. There can be no assurance that Netsmart will be able to draw on the full available balance of the Netsmart Revolving Facility if the financial institutions that have extended such credit commitments become unwilling or unable to fund such borrowings.

The following table summarizes future debt payment obligations as of ~~September~~June 30, ~~2017:~~2018:


(In thousands)	Total		Remainder of 2017		2018		2019		2020		2021		Thereafter		Total		Remainder of 2018		2019		2020		2021		2022		Thereafter
1.25% Cash Convertible Senior Notes ⁽¹⁾	$	345,000	$	0	$	0	$	0	$	345,000	$	0	$	0	$	345,000	$	0	$	0	$	345,000	$	0	$	0	$	0
Term Loan		225,000		6,250		28,125		40,625		150,000		0		0		395,000		10,000		20,000		27,500		30,000		37,500		270,000
Revolving Facility ⁽²⁾		245,000		0		0		0		245,000		0		0		298,750		0		0		0		0		0		298,750
Netsmart Non-Recourse Debt ⁽²⁾
First Lien Term Loan(3)		480,533		1,217		4,866		4,866		4,866		4,866		459,852		476,883		2,433		4,866		4,866		4,866		4,866		454,986
Second Lien Term Loan		167,000		0		0		0		0		0		167,000		167,000		0		0		0		0		0		167,000
Total debt	$	1,462,533	$	7,467	$	32,991	$	45,491	$	744,866	$	4,866	$	626,852	$	1,682,633	$	12,433	$	24,866	$	377,366	$	34,866	$	42,366	$	1,190,736

⁽¹⁾ Assumes no cash conversions of the 1.25% Notes prior to their maturity on July 1, 2020.

⁽²⁾ Assumes no additional borrowings after ~~September~~June 30, ~~2017,~~2018, payment of any required periodic installments of principal and that all drawn amounts are repaid upon maturity.

⁽³⁾ Starting with the year ended December 31, 2017, additional amounts may be due within 125 days after year-end if Netsmart has “excess cash” as defined in the Netsmart Credit Agreement. For the year ended December 31, 2017, no additional amounts were due as a result of this provision.

We account for income taxes under FASB Accounting Standards Codification 740, Income Taxes (“ASC 740”). We calculate the quarterly tax provision consistent with the guidance provided by ASC 740-270, whereby we forecast the estimated annual effective tax rate and then apply that rate to the year-to-date pre-tax book (loss) income. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective rate, including factors such as the valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, or changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. There is no tax benefit recognized on certain of the net operating losses incurred due to insufficient evidence supporting the Company’s ability to use these losses in the future. The effective tax rates were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
(Loss) income before income taxes	$	(17,700	)	$	(2,499	)	$	(170,111	)	$	(2,448	)
Income tax benefit (provision)	$	238		$	2,656		$	1,073		$	2,596
Income (loss) from continuing operations before income taxes													$	78,639		$	(144,018	)	$	42,795		$	(152,411	)
Income tax (provision) benefit													$	(3,683	)	$	1,007		$	(769	)	$	835
Effective tax rate		1.3	%		106.3	%		0.6	%		106.0	%		4.7	%		0.7	%		1.8	%		0.5	%

The United States Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduced significant changes to the income tax law in the United States. Effective in 2018, the Tax Act reduces the United States statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively. In addition, in 2017 we were subject to a one-time transition tax on accumulated foreign subsidiary earnings not previously subject to income tax in the United States.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional benefit of $20.8 million in our financial statements for the year ended December 31, 2017 in accordance with guidance in Staff Accounting Bulletin No. 118 (SAB 118) which allows a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. This provisional benefit includes $26 million benefit for remeasurement of deferred tax balances to reflect the lower federal rate and expense of $5.2 million for the one-time transition tax on accumulated foreign subsidiary earnings not previously subject to income tax in the United States. We will complete our analysis of the Tax Act during 2018, and any needed adjustments to the provisional amounts will be included in income tax expense or benefit in the appropriate period, in accordance with SAB 118. We are continuing to assess the impacts of the Tax Act on the 2018 effective tax rate and income tax accounting, particularly the new Global Intangible Low-taxed Income ("GILTI") tax and Base Erosion and Anti-Abuse Tax (BEAT) rules.

Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to valuation allowance, permanent differences, income attributable to foreign jurisdictions taxed at lower rates, state taxes, tax credits and certain discrete items. Our effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared with the prior year comparable ~~periods,~~period, differs primarily due to ~~$64.2 million~~the reduced U.S. federal statutory rate, the estimated impact of ~~valuation allowance~~the GILTI and BEAT provisions and the stricter executive compensation deduction provisions of the Tax Act, reflected in the ~~nine~~provision for the three and six months ended ~~September~~June 30, ~~2017 for deferred taxes on a capital loss carryforward, which can only can be deductible to the extent of offsetting capital gains.~~2018.

In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). ~~We recorded $67.8 million of valuation allowance during~~In the ~~nine~~six months ended ~~September~~June 30, ~~2017 related~~2018, we released $17.4 million, mostly due to ~~deferred tax assets associated with net operating~~the utilization of capital loss ~~carryforwards, credit carryforwards and other deferred tax assets not expected to be realized.~~carryforward against capital loss carryforward against capital gain incurred in the six months ended June 30, 2018.

Effective January 1, 2017, we adopted ASU 2016-09. The guidance in ASU 2016-09, among other things, will require all income tax effects of share-based awards to be recognized in the statement of operations when the awards vest or are settled as a discrete item in the period in which they occur. In the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, we recorded $1.0 million and $1.5 million, respectively, of tax expense for awards in which the compensation cost recorded was higher than the tax deductions for the awards. WeIn the quarter ended June 30, 2017, we recorded an offsetting release of valuation allowance in the quarter of ~~$1.5 million, the effect of which has already been included in the valuation allowance amount recorded in the nine months ended September 30, 2017 noted above.~~$1.4 million. ASU 2016-09 requires entities to recognize excess tax benefits, regardless of whether the tax deduction reduces taxes payable. AsIn the quarter ended March 31, 2017, as part of adopting the new standard, we recorded a gross cumulative effect adjustment of $5.6 million to the opening balance of accumulated deficit to create a deferred tax asset to recognize excess tax benefits not previously recorded. The net decrease to accumulated deficit was $1.8 million due to the recognition of a corresponding valuation allowance of $3.8 million.

Our unrecognized income tax benefits were ~~$12.0~~$12.8 million and ~~$11.4~~$12.0 million as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. If any portion of our unrecognized tax benefits is recognized, it could impact our effective tax rate. The tax reserves are reviewed periodically and adjusted in light of changing facts and circumstances, such as progress of tax audits, lapse of applicable statutes of limitations, and changes in tax law.

The following tables provide information about the fair values of our derivative financial instruments as of the respective balance sheet dates:

September 30, 2017

June 30, 2018

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

(In thousands)

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives qualifying as cash flow hedges:

Foreign exchange contracts

Prepaid expenses and

other current assets

1,362

Accrued expenses

Prepaid expenses and

other current assets

Accrued expenses

Derivatives not subject to hedge accounting:

1.25% Call Option

Other assets

44,882

N/A

Other assets

18,428

N/A

1.25% Embedded cash conversion option

N/A

Other liabilities

45,973

N/A

Other liabilities

19,404

Total derivatives

46,244

45,973

18,470

19,404

We have entered into non-deliverable forward foreign currency exchange contracts with reputable banking counterparties in order to hedge a portion of our forecasted future Indian Rupee-denominated (“INR”) expenses against foreign currency fluctuations between the United States dollar and the INR. These forward contracts cover a decreasing percentage of forecasted monthly INR expenses over time. As of ~~September~~June 30, ~~2017,~~2018, there were 96 forward contracts outstanding that were staggered to mature monthly starting in ~~October 2017~~July 2018 and ending in ~~June~~December 2018. In the future, we may enter into additional forward contracts to increase the amount of hedged monthly INR expenses or initiate hedges for monthly periods beyond ~~June~~December 2018. As of ~~September~~June 30, ~~2017,~~2018, the total notional amount of ~~each~~the outstanding forward ~~contract was 120~~contracts ranged from 190 to 215 million INR, or the equivalent of ~~$1.8~~$2.8 million to $3.1 million, based on the exchange rate between the United States dollar and the INR in effect as of ~~September~~June 30, ~~2017.~~2018. These amounts also approximate the forecasted future INR expenses we target to hedge in any one month in the future.

The critical terms of the forward contracts and the related hedged forecasted future expenses matched and allowed us to designate the forward contracts as highly effective cash flow hedges. The effective portion of the change in fair value is initially recorded in accumulated other comprehensive loss (“AOCI”) and subsequently reclassified to income in the period in which the cash flows from the associated hedged transactions affect income. Any ineffective portion of the change in fair value of the cash flow hedges is recognized in current period income. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, no amount was excluded from the effectiveness assessment and no gains or losses were reclassified from AOCI into income as a result of forecasted transactions that failed to occur. As of ~~September~~June 30, ~~2017,~~2018, we estimate that ~~$1.4 million~~$42 thousand of net unrealized derivative gains included in AOCI will be reclassified into income within the next twelve months.

The following tables show the impact of derivative instruments designated as cash flow hedges on the consolidated statements of operations and the consolidated statements of comprehensive loss:

	Amount of Gain (Loss) Recognized in OCI (Effective Portion)					Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)				Amount of Gain (Loss) Recognized in OCI (Effective Portion)							Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
(In thousands)	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017		Three Months Ended June 30, 2018			Six Months Ended June 30, 2018			Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Three Months Ended June 30, 2018		Six Months Ended June 30, 2018
Foreign exchange contracts	$	16	$	2,323	Cost of Revenue	$	241	$	674	$	(129	)	$	(207	)	Cost of Revenue	$	112	$	301
					Selling, general and administrative expenses		184		515							Selling, general and administrative expenses		86		230
					Research and development	$	283	$	793							Research and development	$	133	$	355

	Amount of Gain (Loss) Recognized in OCI (Effective Portion)					Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)				Amount of Gain (Loss) Recognized in OCI (Effective Portion)					Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
(In thousands)	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Three Months Ended September 30, 2016		Nine Months Ended September 30, 2016		Three Months Ended June 30, 2017		Six Months Ended June 30, 2017		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Three Months Ended June 30, 2017		Six Months Ended June 30, 2017
Foreign exchange contracts	$	971	$	1,172	Cost of Revenue	$	88	$	84	$	434	$	2,307	Cost of Revenue	$	255	$	433
					Selling, general and administrative expenses		71		68					Selling, general and administrative expenses		194		331
					Research and development	$	126	$	120					Research and development	$	300	$	510

In June 2013, concurrent with the issuance of the 1.25% Notes, we entered into privately negotiated hedge transactions with certain of the initial purchasers of the 1.25% Notes (collectively, the “1.25% Call Option”). Assuming full performance by the counterparties, the 1.25% Call Option is intended to offset cash payments in excess of the principal amount due upon any conversion of the 1.25% Notes.

The 1.25% Call Option, which is indexed to our common stock, is a derivative asset that requires mark-to-market accounting treatment (due to the cash settlement features) until the 1.25% Call Option settles or expires. The 1.25% Call Option is measured and reported at fair value on a recurring basis, within Level 3 of the fair value hierarchy. For further discussion of the inputs used to determine the fair value of the 1.25% Call Option, refer to Note 3,4, “Fair Value Measurements and Long-term Investments.”

The 1.25% Call Option does not qualify for hedge accounting treatment. Therefore, the change in fair value of these instruments is recognized immediately in our consolidated statements of operations in Other income, net. Because the terms of the 1.25% Call Option are substantially similar to those of the 1.25% Notes embedded cash conversion option, discussed below, we expect the net effect of those two derivative instruments on our earnings to be minimal.

The embedded cash conversion option within the 1.25% Notes is required to be separated from the 1.25% Notes and accounted for separately as a derivative liability, with changes in fair value reported in our consolidated statements of operations in Other income, net until the cash conversion option settles or expires. The initial fair value liability of the embedded cash conversion option was $82.8 million, which simultaneously reduced the carrying value of the 1.25% Notes (effectively an original issuance discount). The embedded cash conversion option is measured and reported at fair value on a recurring basis, within Level 3 of the fair value hierarchy. For further discussion of the inputs used to determine the fair value of the embedded cash conversion option, refer to Note 3,4, “Fair Value Measurements and Long-term Investments.”

The following table shows the net impact of the changes in fair values of the 1.25% Call Option and the 1.25% Notes’ embedded cash conversion option in the consolidated statements of operations:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
1.25% Call Option	$	12,837		$	2,306		$	27,802		$	(39,404	)	$	(6,983	)	$	(2,639	)	$	(28,151	)	$	14,966
1.25% Embedded cash conversion option		(13,043	)		(2,362	)		(28,314	)		39,609			7,042			2,631			28,373			(15,272	)
Net (loss) gain included in other income, net	$	(206	)	$	(56	)	$	(512	)	$	205		$	59		$	(8	)	$	222		$	(306	)

Changes in the balances of each component included in AOCI are presented in the tables below. All amounts are net of tax and exclude non-controlling interest.

(In thousands)	Foreign Currency Translation Adjustments			Unrealized Net (Losses) Gains on Available for Sale Securities			Unrealized Net Gains on Foreign Exchange Contracts			Total			Foreign Currency Translation Adjustments			Unrealized Net Gains on Foreign Exchange Contracts			Total
Balance as of December 31, 2016 ⁽¹⁾	$	(6,028	)	$	(56,420	)	$	619		$	(61,829	)
Balance as of December 31, 2017 ⁽¹⁾													$	(2,676	)	$	691		$	(1,985	)
Other comprehensive income (loss) before reclassifications		3,040			(106,355	)		1,421			(101,894	)		(1,562	)		(153	)		(1,715	)
Net losses (gains) reclassified from accumulated other comprehensive loss ⁽²⁾		0			162,865			(1,209	)		161,656			0			(506	)		(506	)
Net other comprehensive income		3,040			56,510			212			59,762			(1,562	)		(659	)		(2,221	)
Balance as of September 30, 2017 ⁽³⁾	$	(2,988	)	$	90		$	831		$	(2,067	)
Balance as of June 30, 2018 ⁽²⁾													$	(4,238	)	$	32		$	(4,206	)

⁽¹⁾Majority of unrealized losses as of December 31, 2016 relates to decline in fair value of NantHealth common stock.

⁽¹⁾ ~~Net of taxes of $166 thousand for unrealized net gains on foreign exchange contract derivatives.~~

⁽²⁾~~Net of taxes of $521 thousand for unrealized net gains on foreign exchange contract derivatives.~~

The following tables reflect the tax effects allocated to each component of other comprehensive income (loss) (“OCI”):

	Three Months Ended September 30,																		Three Months Ended June 30,
	2017									2016									2018								2017
(In thousands)	Before-Tax Amount			Tax Effect			Net Amount			Before-Tax Amount			Tax Effect			Net Amount			Before-Tax Amount			Tax Effect		Net Amount			Before-Tax Amount			Tax Effect			Net Amount
Foreign currency translation adjustments	$	693		$	0		$	693		$	150		$	0		$	150		$	(1,685	)	$	0	$	(1,685	)	$	832		$	0		$	832
Available for sale securities:
Net loss arising during the period		(20,704	)		1			(20,703	)		9,750			0			9,750			0			0		0			(10,952	)		1			(10,951	)
Net loss reclassified into income ⁽¹⁾		20,700			0			20,700			0			0			0			0			0		0			142,165			0			142,165
Net change in unrealized gains (losses) on available for sale securities		(4	)		1			(3	)		9,750			0			9,750			0			0		0			131,213			1			131,214
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts:
Net gains (losses) arising during the period		16			(6	)		10			971			(382	)		589			(129	)		34		(95	)		434			(169	)		265
Net (gains) losses reclassified into income(1)		(708	)		276			(432	)		(285	)		112			(173	)		(331	)		86		(245	)		(749	)		292			(457	)
Net change in unrealized (losses) gains on foreign exchange contracts		(692	)		270			(422	)		686			(270	)		416			(460	)		120		(340	)		(315	)		123			(192	)
Net (loss) gain on cash flow hedges		(692	)		270			(422	)		686			(270	)		416			(460	)		120		(340	)		(315	)		123			(192	)
Other comprehensive income (loss)	$	(3	)	$	271		$	268		$	10,586		$	(270	)	$	10,316		$	(2,145	)	$	120	$	(2,025	)	$	131,730		$	124		$	131,854

	Nine Months Ended September 30,																		Six Months Ended June 30,
	2017									2016									2018								2017
(In thousands)	Before-Tax Amount			Tax Effect			Net Amount			Before-Tax Amount			Tax Effect			Net Amount			Before-Tax Amount			Tax Effect		Net Amount			Before-Tax Amount			Tax Effect			Net Amount
Foreign currency translation adjustments	$	3,040		$	0		$	3,040		$	(49	)	$	0		$	(49	)	$	(1,562	)	$	0	$	(1,562	)	$	2,347		$	0		$	2,347
Available for sale securities:
Net loss arising during the period		(106,358	)		3			(106,355	)		(8,365	)		0			(8,365	)		0			0		0			(85,654	)		2			(85,652	)
Net loss reclassified into income ⁽¹⁾		162,865			0			162,865			0			0			0			0			0		0			142,165			0			142,165
Net change in unrealized gains (losses) on available for sale securities		56,507			3			56,510			(8,365	)		0			(8,365	)		0			0		0			56,511			2			56,513
Derivatives qualifying as cash flow hedges:
Foreign exchange contracts:
Net gains (losses) arising during the period		2,323			(902	)		1,421			1,172			(462	)		710			(207	)		54		(153	)		2,307			(896	)		1,411
Net (gains) losses reclassified into income(1)		(1,982	)		773			(1,209	)		(272	)		107			(165	)		(886	)		380		(506	)		(1,274	)		497			(777	)
Net change in unrealized gains (losses) on foreign exchange contracts		341			(129	)		212			900			(355	)		545			(1,093	)		434		(659	)		1,033			(399	)		634
Net gain (loss) on cash flow hedges		341			(129	)		212			900			(355	)		545			(1,093	)		434		(659	)		1,033			(399	)		634
Other comprehensive income (loss)	$	59,888		$	(126	)	$	59,762		$	(7,514	)	$	(355	)	$	(7,869	)	$	(2,655	)	$	434	$	(2,221	)	$	59,891		$	(397	)	$	59,494

In addition to commitments and obligations in the ordinary course of business, we are currently subject to various legal proceedings and claims that have not been fully adjudicated. We intend to vigorously defend ourselves in these matters.

No less than quarterly, we review the status of each significant matter and assess our potential financial exposure. We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made.

The outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters. In the opinion of our management, the ultimate disposition of pending legal proceedings or claims will not have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, if one or more of these legal proceedings were resolved against us in a reporting period for amounts in excess of our management’s expectations, our consolidated financial statements for that reporting period could be materially adversely affected. Additionally, the resolution of a legal proceeding against us could prevent us from offering our products and services to current or prospective clients or cause us to incur increased compliance costs, either of which could further adversely affect our operating results.

On May 1, 2012, Physicians Healthsource, Inc. filed a class action complaint in the U.S. District Court for the Northern District of Illinois against ~~us alleging violations~~us. The complaint alleges that, on multiple occasions between July 2008 and December 2011, we or our agent sent advertisements by fax to the plaintiff and a class of similarly situated persons, without first receiving the recipients’ express permission or invitation in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 (the “TCPA”). The plaintiff sought $500 for each alleged violation of the TCPA, treble damages if the Court finds the violations to be willful, knowing or intentional, and injunctive and other relief. Allscripts answered the complaint denying all material allegations and asserting a number of affirmative defenses, as well as counterclaims for breach of a license agreement. On March 31, 2016, plaintiff filed its motion for class certification. On May 31, 2016, we filed our opposition to plaintiff’s motion for class certification, and simultaneously moved for summary judgment on all of plaintiff’s claims. On June 2, 2017, ~~the court denied Allscripts’ motion for summary judgment, and also denied Plaintiff’s motion for class certification. Plaintiff did not seek appellate review of the Court’s denial of~~an order was entered denying class certification ~~so the only claim remaining in~~and, accordingly, the case ~~is Plaintiff’s individual TCPA claim. On August 11, 2017, Plaintiff filed~~will not proceed on a ~~motion for summary judgment against Allscripts. On September 25, the court stayed this matter pending the outcome of the appeal in~~ ~~Brodsky v. Humana Dental Ins. Co., (Case 17-8019) 7th Cir., which may have implications on the outcome of Plaintiff’s motion in this case.~~class-wide basis.

The EIS Business acquired from McKesson on October 2, 2017 ~~(as discussed below under Note 15, “Subsequent Events”)~~ is subject to a May 2017 civil investigative demand ~~(CID)~~(“CID”) from the U.S. Attorney’s Office for the Eastern District of New York. The CID requests documents and information related to the certification McKesson obtained in connection with the U.S. Department of Health and Human Services’ Electronic Health Record Incentive Program. McKesson has agreed, with respect to the CID, to indemnify Allscripts for amounts paid or payable to the government (or any private relator) involving any products or services marketed, sold or licensed by the EIS Business as of or prior to the closing of the acquisition.

Practice Fusion, acquired by Allscripts on February 13, 2018, received in March 2017 a request for documents and information from the U.S. Attorney’s Office for the District of Vermont pursuant to a CID. In April 2018, Practice Fusion received a second request for documents and information. These CIDs relate to the certification of Practice Fusion’s software under the U.S. Office of the National Coordinator for Health Information Technology’s electronic health record certification program, compliance with the Anti-Kickback Statute in relation to claims made by healthcare payers that resulted from referrals, and related business practices. It has been Practice Fusion’s practice to respond to such matters in a cooperative, thorough and timely manner. To date, neither CID has led to a claim or legal proceeding against Practice Fusion.

On January 25, 2018, a complaint was filed in Surfside Non-Surgical Orthopedics, P.A. v. Allscripts Healthcare Solutions, Inc., No. 1:18-cv-00566, in the Northern District of Illinois. This is a purported class action lawsuit related to a January 18, 2018 ransomware attack, and alleges the following counts: (1) negligence, gross negligence and negligence per se; (2) breach of contract; (3) unjust enrichment; (4) violation of the Illinois Consumer Fraud Act; and (5) violation of the Illinois Deceptive Trade Practices Act. Plaintiff seeks to represent a class of customers seeking damages from Allscripts. The parties are currently engaged in limited jurisdictional discovery. Allscripts expects to respond to the complaint after this discovery is completed.

Two of the product offerings acquired with the EIS Business, Horizon Clinicals and Series2000 Revenue Cycle, were sunset after March 31, 2018. The decision to discontinue maintaining and supporting these solutions was made prior to our acquisition of the EIS Business and, therefore, are presented below as discontinued operations. Until the end of the first quarter of 2018, we were involved in ongoing maintenance and support for these solutions until customers have transitioned to other platforms. No disposal gains or losses were recognized during the three and six months ended June 30, 2018 related to these discontinued operations.

The following table summarizes the major classes of assets and liabilities of the discontinued operations, as reported on the consolidated balance sheets as of the dates indicated:

The following table summarizes the major classes of line items constituting income (loss) of the discontinued operations, as reported in the consolidated statements of operations for the three and six months ended June 30, 2018. The activity during the three months ended June 30, 2018 relates primarily to certain revenue transactions and accrued compensation and benefits, which were finalized subsequent to March 31, 2018.

During the three and six months ended June 30, 2018, the discontinued operations used $5.6 million and $1.3 million of cash, respectively.

We primarily derive our revenues from sales of our proprietary software (either as a direct license sale or under a subscription delivery model), which also serves as the basis for our recurring service contracts for software support and maintenance and certain transaction-related services. In addition, we provide various other client services, including installation, and managed services such as outsourcing, private cloud hosting and revenue cycle management.

During the first quarter of 2018, in an effort to further streamline and align our operating structure around our key acute and population health management solutions, we made several changes to our organizational and reporting structure. These changes included the split of our former Population Health operating segment into several components. The dbMotion business unit, formerly included in the Population Health operating segment, is now aligned with the Hospitals and Health Systems operating segment within the Clinical and Financial solutions reportable segment. The Care Management, Referral Management and Careport business units, formally included in the Population Health operating segment, were combined into a new CarePort operating segment within the Population Health reportable segment. The prior period segment disclosures below were revised to conform to the current year presentation.

During the second quarter of 2018, we changed the presentation of certain research and development expenses related to common solutions and resources that benefit all of our business units, other than Netsmart. Such expenses were previously internally allocated to our business units. Under the new presentation, such expenses are no longer internally allocated and are included as part of “Unallocated Amounts.” The gross profit and income from operations previously reported for the three and six months ended June 30, 2017 have been recast to match the new presentation. As a result, the gross profit and income from operations of the Clinical and Financial Solutions reportable segment increased by $1 million and $12 million, respectively, for the three months ended June 30, 2017 and by $2 million and $21 million, respectively, for the six months ended June 30, 2017. In addition, the gross profit and income from operations of the Population Health reportable segment increased by nil and $1 million, respectively, for both the three and six months ended June 30, 2017.

As of ~~September~~June 30, ~~2017,~~2018, we had ~~eight~~ten operating segments, which are aggregated into three reportable segments. The Clinical and Financial Solutions reportable segment includes the ~~Ambulatory,~~ Hospitals and Health Systems, ~~previously named “Acute”, and the~~Ambulatory, Payer and Life Sciences, and EIS-Classics strategic business units, each of which represents a separate operating segment. This reportable segment derives its revenue from the sale of integrated clinical software applications and financial and information solutions, which primarily include ~~electronic health record-related~~EHR-related software,connectivity and coordinated care solutions, financial and practice management software, related installation, support and maintenance, outsourcing, private cloud hosting, revenue cycle management, training and electronic claims administration services. The Population Health reportable segment is comprised of ~~four~~five separate operating segments: ~~Population Health,~~CarePort, FollowMyHealth^®, EPSi^TM, EIS-EWS and NantHealth. This reportable segment derives its revenue from the sale of health management, financial management and ~~coordinated care~~patient engagement solutions, which are mainly targeted at hospitals, health systems, other care facilities and Accountable Care Organizations (“ACOs”). These solutions enable clients to ~~connect,~~ transition, analyze and coordinate care across the entire care community. ~~The NantHealth~~This segment also provides document, content and supply chain management solutions through the EIS-EWS operating segment was created from our acquisition of certain assets related to NantHealth’s provider/patient engagement solutions business on August 25, 2017. The operating results associated with this business have been included in the population health reportable segment results since the date of the acquisition.segment. Refer to Note 2,3, “Business ~~Combinations,”~~Combinations” for additional information ~~related to this acquisition.~~regarding the sale of the Strategic Sourcing and OneContent business units, respectively, which together comprise a substantial majority of the EIS-EWS operating segment. The Netsmart reportable segment is comprised of the Netsmart strategic business unit, which represents a separate operating segment. The Netsmart segment also includes the results of HealthMEDX and DeVero, which were acquired subsequent to the Netsmart Transaction. Refer to Note 2, “Business Combinations” for further details regarding the acquisition of these businesses. Netsmart operates in the home care and behavioral healthcare information technology field throughout the United States and provides software and technology solutions to the health and human services industry, which comprises behavioral health, addiction treatment, intellectual and developmental disability services, child and family services, and public health segment, as well as to post-acute home care organizations.

The results of operations related to two of the product offerings acquired with the EIS Business are presented throughout these financial statements as discontinued operations and are included in the Clinical and Financial Solutions reportable segment, except for acquisition-related deferred revenue adjustments, which are included in “Unallocated Amounts”. Refer to Note 13, “Discontinued Operations”.

Our Chief Operating Decision Maker (“CODM”) uses segment revenues, gross profit and income from operations as measures of performance and to make decisions on allocation of resources. With the exception of the Netsmart segment, in determining these performance measures, we do not include in revenue the amortization of acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in a business acquisition. With the exception of the Netsmart segment, we also exclude the amortization of intangible assets, stock-based compensation expense, non-recurring expenses and transaction-related costs, and non-cash asset impairment charges from the operating segment data provided to our CODM. Non-recurring expenses relate to certain severance, product consolidation, legal, consulting and other charges incurred in connection with activities that are considered one-time. Accordingly, these amounts are not included in our reportable segment results and are included in an “Unallocated Amounts” category within our segment disclosure. The “Unallocated Amounts” category also includes (i) corporate general and administrative expenses (including marketing expenses) and certain research and development expenses related to common solutions and resources that benefit all of our business units (refer to discussion above), all of which are centrally managed, ~~as well as~~and (ii) revenue and the associated cost from the resale of certain ancillary products, primarily hardware, other than the respective amounts associated with the Netsmart segment. ~~The historical results of our Homecare~~^TM ~~business prior to the Netsmart Transaction, which were previously reported as part of Population Health, are also included in the “Unallocated Amounts” category.~~ The Netsmart segment, as presented, includes all revenue and expenses incurred by Netsmart since it operates as a stand-alone business entity and its resources allocation and performance are reviewed and measured at such all-inclusive level. The eliminations of intercompany transactions between Allscripts and Netsmart are included in the “Unallocated Amounts” category. We do not track our assets by segment.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Revenue:
Clinical and Financial Solutions	$	303,323		$	276,503		$	870,452		$	830,200		$	389,497		$	304,111		$	763,476		$	600,291
Population Health		60,515			61,722			179,313			170,803			57,068			42,508			126,773			85,937
Netsmart		83,618			52,621			235,046			96,854			86,366			78,421			168,852			151,428
Unallocated Amounts		1,986			1,538			4,197			26,606			(7,805	)		1,051			(9,753	)		1,910
Discontinued Operations														451			0			(9,845	)		0
Total revenue	$	449,442		$	392,384		$	1,289,008		$	1,124,463		$	525,577		$	426,091		$	1,039,503		$	839,566

Gross Profit:
Clinical and Financial Solutions	$	130,224		$	113,677		$	363,228		$	349,017		$	165,073		$	126,810		$	319,722		$	246,691
Population Health		41,947			46,337			125,535			125,152			41,369			34,909			94,575			70,818
Netsmart		39,644			17,378			111,489			32,327			38,877			37,271			75,178			71,845
Unallocated Amounts		(9,896	)		(11,233	)		(32,190	)		(21,755	)		(33,053	)		(11,499	)		(49,143	)		(23,211	)
Discontinued Operations														397			0			(6,694	)		0
Total gross profit	$	201,919		$	166,159		$	568,062		$	484,741		$	212,663		$	187,491		$	433,638		$	366,143

Income (loss) from operations:
Clinical and Financial Solutions	$	68,837		$	59,921		$	186,846		$	188,145		$	79,501		$	75,501		$	161,648		$	138,273
Population Health		29,298			32,977			86,282			81,895			26,587			27,884			63,106			56,562
Netsmart		7,153			(6,426	)		23,910			(8,825	)		1,219			7,828			3,532			16,757
Unallocated Amounts		(79,915	)		(69,598	)		(239,298	)		(213,871	)		(167,028	)		(90,109	)		(286,361	)		(179,225	)
Discontinued Operations														924			0			(5,042	)		0
Total income from operations	$	25,373		$	16,874		$	57,740		$	47,344		$	(58,797	)	$	21,104		$	(63,117	)	$	32,367

The majority of the restricted cash balance as of ~~September~~June 30, 2018 and 2017 represents Netsmart’s cash deposits to maintain two letters of credit with a financial institution related to customer ~~agreements.~~agreements and an escrow fund related to a previous acquisition associated with the acquired EIS Business.

	Nine Months Ended September 30,				June 30,
(In thousands)	2017		2016		2018		2017
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	104,301	$	76,636	$	135,851	$	82,714
Restricted cash		5,123		615		4,925		6,400
Total cash, cash equivalents and restricted cash	$	109,424	$	77,251	$	140,776	$	89,114


					Six Months Ended June 30,
(In thousands)					2018		2017
Supplemental non-cash information:
Exchange of Netsmart, Inc. common stock for redeemable convertible preferred stock - Netsmart by Netsmart, Inc. management	$	0	$	25,543
Exchange of NantHealth, Inc. common stock for net assets acquired of provider/patient solutions business	$	42,750	$	0
Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart	$	32,887	$	18,344	$	24,297	$	21,925
Obligations incurred to purchase capitalized software or enter into capital leases	$	11,515	$	0	$	6,422	$	7,684
Contribution of assets in exchange for equity interest					$	4,000	$	0
Issuance of treasury stock to commercial partner	$	334	$	0	$	0	$	334

During the three and six months ended June 30, 2018, we recognized non-cash asset impairment charges of $30.1 million related to the write-off of purchased third-party software as a result of our decision to discontinue several software development projects

On ~~October~~July 2, ~~2017, Allscripts Healthcare,~~2018, ECS Acquisition Co. LLC, a Delaware limited liability company and a wholly-owned subsidiary of ~~the Company (“Healthcare LLC”~~Netsmart (the “Purchaser”), ~~completed~~purchased from Change Healthcare Technologies, LLC, a Delaware limited liability company (“CHT”), and Change Healthcare Holdings, LLC, a Delaware limited liability company (“CHC” and, together with “CHT”, the ~~transactions contemplated by~~“Sellers”), all issued and outstanding membership interests of Barista Operations, LLC, a ~~purchase agreement (the “Purchase Agreement”) with McKesson Corporation (“McKesson”), pursuant to~~Delaware limited liability company, which ~~Healthcare LLC purchased McKesson’s Enterprise Information Solutions Business division (the “EIS Business”), which provides certain software~~entity owns and operates the extended care solutions business of Sellers and their subsidiaries providing information technology solutions and services to ~~hospitals and health systems, by acquiring all of~~ the ~~outstanding equity interests of two indirect, wholly-owned subsidiaries~~Care at Home industry, which comprises the Extended Care Solutions business of McKesson ~~for a~~Technology Solutions that was contributed to CHC by McKesson Corporation effective March 1, 2017 (the “Purchase Agreement”). The purchase price ~~of $185~~for the acquisition was $167.5 million and was funded through borrowings under the Netsmart Credit Agreements. The purchase price is subject to adjustments for net working ~~capital and net debt.~~ ~~The~~capital. Additionally, $2.5 million of the purchase price was ~~funded~~deposited into escrow at the closing of the acquisition and is subject to release to the Sellers or to the Purchaser based on the achievement of certain revenue thresholds.

In accordance with the Purchase Agreement, (i) CHC will provide certain transition services to Purchaser pursuant to a transition services agreement and (ii) CHC and Netsmart Technologies will negotiate in good faith and use commercially reasonable efforts to enter into certain commercial arrangements pursuant to which, among other things, Netsmart Technologies will market and sell certain products of CHC.

On August 2, 2018, we announced that our Board approved a new stock repurchase program under which we may repurchase up to $250 million of our common stock through ~~incremental borrowings~~December 31, 2020. The new stock repurchase program supersedes the previously existing stock repurchase program, which was announced on November 17, 2016 and authorized us to repurchase up to $200 million through December 31, 2019. The remaining repurchase authorization under our previous stock repurchase program was $62.2 million as of June 30, 2018.

Any repurchase activity will depend on many factors such as our working capital needs, cash requirements for investments, debt ~~facilities. The financial results~~repayment obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time and there is no guarantee as to the ~~EIS Business~~exact number of shares or value that will be ~~consolidated with our financial results starting on~~repurchased under the ~~date of the transaction. As of the date of this Form 10-Q, the preliminary allocation of the fair value of the consideration transferred has not yet been completed~~.stock repurchase program.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical fact or pattern. Forward-looking statements can also be identified by the use of words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance. Actual results could differ significantly from those set forth in the forward-looking statements and reported results should not be considered an indication of future performance. Certain factors that could cause our actual results to differ materially from those described in the forward-looking statements include, but are not limited to, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 (our “Form 10-K”) under the heading “Risk Factors” and elsewhere. Certain factors that could cause Allscripts actual results to differ materially from those described in the forward-looking statements include, but are not limited to: the anticipated sale of our ownership interests in the Netsmart joint business entity, including our ability to enter into and complete the transaction and the expected timing and use of the proceeds of the transaction; the expected financial contribution and results of the ~~Netsmart joint business entity, including consolidation for financial reporting purposes,~~EIS Business, the ~~EIS business, and the~~NantHealth provider/patient solutions business, ~~acquired from NantHealth;~~Practice Fusion and Health Grid; the successful integration of the ~~EIS and the provider/patient solutions businesses;~~businesses recently acquired by us; the anticipated and unanticipated expenses and liabilities related to the ~~acquisition and~~EIS business, the ~~acquired EIS and~~NantHealth provider/patient solutions ~~businesses;~~ business, Practice Fusion and Health Grid; security breaches resulting in unauthorized access to our or our clients’ computer systems or data, including denial-of-service, ransomware or other Internet-based attacks (including the impact of our recent ransomware attack);Allscripts failure to compete successfully; consolidation in Allscripts industry; current and future laws, regulations and industry initiatives; increased government involvement in Allscripts industry; the failure of markets in which Allscripts operates to develop as quickly as expected; Allscripts or its customers’ failure to see the benefits of government programs; changes in interoperability or other regulatory standards; the effects of the realignment of Allscripts sales, services and support organizations; market acceptance of Allscripts products and services; the unpredictability of the sales and implementation cycles for Allscripts products and services; Allscripts ability to manage future growth; Allscripts ability to introduce new products and services; Allscripts ability to establish and maintain strategic relationships; risks related to the acquisition of new companies or technologies; the performance of Allscripts products; Allscripts ability to protect its intellectual property rights; the outcome of legal proceedings involving Allscripts; Allscripts ability to hire, retain and motivate key personnel; performance by Allscripts content and service providers; liability for use of content; ~~security breaches;~~ price reductions; Allscripts ability to license and integrate third party technologies; Allscripts ability to maintain or expand its business with existing customers; risks related to international operations; changes in tax rates or laws; business disruptions; Allscripts ability to maintain proper and effective internal controls; and asset and long-term investment impairment charges. The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in Part I, Item 1, “Financial Statements (unaudited)” in this Form 10-Q, as well as our Form 10-K filed with the Securities and Exchange Commission (the “SEC”). We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Each of the terms “we,” “us,” “our” or “company” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.

We deliver information technology (“IT”) solutions and services to help healthcare organizations achieve optimal clinical, financial and operational results. We sell our solutions to physicians, hospitals, governments, health systems, health plans, life-sciences companies, retail clinics, retail pharmacies, pharmacy benefit managers, insurance companies, employer wellness clinics, and post-acute organizations, such as home health and hospice agencies. We help our clients improve the quality and efficiency of health care with solutions that include electronic health records (“EHRs”), connectivity, private cloud hosting, outsourcing, analytics, patient engagement, clinical decision support and population health management.

Our solutions empower healthcare professionals with the data, insights and connectivity to other caregivers they need to succeed in an industry that is rapidly changing from fee-for-service models to fee-for-value advanced payment models. We believe we offer some of the most comprehensive solutions in our industry today. Healthcare organizations can effectively manage patients and patient populations across all care settings using a combination of our physician, hospital, health system, post-acute care and population health management products and services. We believe these solutions will help transform health care as the industry seeks new ways to manage risk, improve quality and reduce costs.

Globally, healthcare providers face an aging population and the challenge of caring for an increasing number of patients with chronic diseases. At the same time, practitioners worldwide are also under increasing pressure to demonstrate the delivery of high quality care at lower costs. Population health management, analytics, connectivity based on open Application Programming Interfaces (“APIs”), and patient engagement are strategic imperatives that can help address these challenges. In the United States, for example, such initiatives will be critical tools for success under the framework of the ~~new~~ Quality Payment Program (“QPP”), launched by the Centers for Medicare & Medicaid Services (“CMS”) in response to the passage of the Medicare Access and CHIP Reauthorization Act

(“MACRA”). As healthcare providers and payers migrate from volume-based to value-based care delivery, interoperable solutions that are connected to the consumer marketplace are the key to market leadership in the new healthcare reality. Additionally, there is a small but growing portion of the market interested in payment models not reliant on insurance, such as the direct primary care model, with doctors and other healthcare professionals interested in the clinical value of the interoperable EHR separate and apart from payment mechanisms established by public or commercial payers or associated reporting requirements.

We believe our solutions are delivering value to our clients by providing them with powerful connectivity, as well increasingly robust patient engagement and care coordination tools, enabling ~~United States~~ users to successfully participate in ~~alternate~~alternative payment models that reward high value care delivery. Population health management is commonly viewed as one of the critical next frontiers in healthcare delivery, and we expect this rapidly emerging area to be a key driver of our future growth, both domestically and globally.

Recent advances in molecular science and computer technology are creating opportunities for the delivery of personalized medicine solutions. We believe these solutions will transform the coordination and delivery of health care, ultimately improving patient outcomes.

Specific to the United States, the healthcare IT industry in which we operate is in the midst of a period of rapid evolution, primarily due to new laws and regulations, as well as changes in industry standards. Various incentives that exist today (including ~~the EHR Incentive Program (a.k.a. Meaningful Use) and~~ alternative payment models that reward high value care delivery) ~~are~~have been rapidly moving health care toward a time where EHRs are as common as practice management or other financial systems in all provider offices. As a result, we believe that legislation, such as the aforementioned MACRA, as well as other government-driven initiatives ~~possibly~~(including at the state ~~level,~~level), will continue to affect healthcare IT adoption and expansion, including products and solutions like ours. We also believe that we are well-positioned in the market to take advantage of the ongoing opportunity presented by these changes.

Given that ~~we expect~~ CMS ~~will release~~has proposed further ~~future~~ regulations ~~related to~~which require EHRs and other health information technology, including the QPP and payment rules for upcoming years, even as we comply with previously published rules, ~~associated with the QPP,~~ as well as Stage 3 of the Meaningful Use program for those organizations not eligible for the QPP, our industry is preparing for additional areas in which we must execute compliance. Similarly, our ability to achieve applicable product certifications, any changing ~~frequency of~~strategies related to the Office of the National Coordinator for Health Information Technology (“ONC”) certification program, and the length, if any, of additional related development and other efforts required to meet regulatory standards, could materially impact our capacity to maximize the market opportunity. All of our market-facing EHR solutions, as well as the Allscripts EDTM, dbMotion and FollowMyHealth® products, have successfully completed the testing process and are certified as 2015 Edition-compliant by an ONC-Authorized Certification Body, in accordance with the applicable provider or hospital certification criteria adopted by the United States Secretary of Health and Human Services.

Conversations around the Medicare Sustainable Growth Rate reimbursement model concluded in the United States Congress in 2015 when the MACRA was passed, which further encouraged the adoption of health IT necessary to satisfy new requirements more closely associating the report of quality measurements to Medicare payments. ~~With~~Following the finalization of the rule for the QPP in 2017, providers accepting payment from Medicare ~~will have~~were given an opportunity to select one of two payment models: the Merit-based Incentive Payment System (“MIPS”) or an Advanced Alternative Payment Model (“APM”)~~, as allowed by the regulation. These~~. Both of these programs ~~will~~ require ~~increased~~substantive reporting on quality measures; additionally, the MIPS ~~consolidates~~consolidated several preexisting incentive programs, including Meaningful Use and Physician Quality Reporting System, under one umbrella, as required by statute. The implementation of this new law could drive additional interest in our products among providers who were not eligible for or chose not to participate in the Health Information Technology for Economic and Clinical Health Act (“HITECH”) incentive program but now see a new reason to adopt EHRs and other health information technologies or by those needing to purchase more robust systems to help ~~them be successful under the~~comply with more complex MACRA requirements. ~~Regulations~~Additional regulations have been and will likely continue to be released ~~in the fourth quarter of 2016 in response~~annually clarifying requirements related to ~~the MACRA also addressed, at least in part, current ambiguities among~~reporting and quality measures, which will enable physician populations and healthcare organizations ~~enabling them~~ to make strategic decisions about the purchase of analytic software or other solutions important to comply with the new law and associated regulations. ~~Such regulations are expected to be released on an annual basis and are in process for 2017.~~

HITECH resulted in additional related new orders for our EHR products, and we believe that the MACRA could drive purchases of not only EHRs but additional technologies necessary in advanced payment models. Large physician groups will continue to purchase and enhance their use of EHR ~~technology, though~~technology; while the number of very large practices with over 100 physicians that have not yet acquired such technology ~~is quickly decreasing.~~has decreased significantly, those considering replacement purchases are increasing. Such practices may choose to replace older EHR technology in the future as regulatory requirements (such as those related to ~~QPP-related programs for~~ Advanced APMs) and business realities dictate the need for updates and upgrades, as well as additional features and functionality. Additionally, we believe that a number of companies who certified their EHR products for Stage 1 or Stage 2 of Meaningful Use have and will continue to demonstrate that they have not been able to comply with the requirements for the 2015 Edition, which continues to present additional opportunities in the replacement market, particularly in the smaller physician space. As ~~the~~ incentive ~~payments have begun to wind down and~~payment strategies shifts in policies ~~related to payment adjustments from~~under the ~~new presidential~~current Presidential Administration in the United States, ~~is revealed,~~ the role of commercial payers and their continued expansion of alternative payment models, as well as the anticipated growth in Medicaid payment models, isare expected to provide ~~a different motivation~~additional incentives for purchase and expansion.

We also continue to see activity in local community-based buying, whereby individual hospitals, health systems and integrated delivery networks ~~are subsidizing~~subsidize the purchase of EHR licenses or related services for local, affiliated physicians and physicians across their employed physician base ~~as part of an offer~~in order to leverage buying power and help those practices take advantage of payment reform opportunities. This activity has also resulted in a pull-through effect where smaller practices affiliated with a community hospital are motivated to participate in the incentive program, while the subsidizing health system expands connectivity within the local provider community. We believe that the 2013 extension of exceptions to the Stark Law and ~~Anti-kickback exceptions,~~Anti-Kickback Statute, which allowed hospitals and other organizations to subsidize the purchase of EHRs, will continue to contribute to the ~~continuation~~growth of this market dynamic. We also believe that new orders driven by the MACRA legislation and related to EHR and community-based activity ~~will~~may continue to come in as physicians in those small- and medium-sized practices ~~who have not yet participated~~ seek to avoid payment adjustments stemming from the ~~QPP.~~QPP or programs implemented by commercial payers. The associated challenge we face is to successfully position, sell, implement and support our products to ~~the hospital,~~hospitals, health ~~system~~systems or integrated delivery ~~network~~networks that ~~is subsidizing its~~subsidize their affiliated physicians. We believe the community programs we have in place will ~~aid~~help us ~~in penetrating this market.~~penetrate these markets.

We believe we have taken and continue to take the proper steps to maximize the opportunity presented by the QPP and other new payment programs. However, given the effects the laws are having on our clients, there can be no assurance that they will result in significant new orders for us in the near term, and if they do, that we will have the capacity to meet the additional market demand in a timely fashion.

Additionally, other public laws to reform the United States healthcare system contain various provisions which may impact us and our clients. Continued ~~decisions~~efforts by the ~~new~~current Presidential Administration and Congress to alter the implementation of the Patient Protection and Affordable Care Act (as amended, the “PPACA”) ~~creates~~create uncertainty for us and for our clients, ~~for~~particularly as it relates to funding of the ~~near term.~~cost sharing subsidies. Some laws currently in place may have a positive impact by requiring the expanded use of EHRs, quality measurement and analytics tools to participate in certain federal, state or private sector programs. Others, such as ~~the repeal of or~~ adjustments made to the PPACA by the ~~new~~current presidential Administration and Congress, laws or regulations mandating reductions in reimbursement for certain types of providers, decreasing insurance coverage of patients, ~~decisions not~~state level requests for waivers from CMS related to ~~continue policies from the previous Administration,~~Medicaid modeling, or increasing regulatory oversight of our products or our business practices, may have a negative impact by reducing the resources available to purchase our products. Increases in fraud and abuse enforcement and payment adjustments for non-participation in certain programs or overpayment of certain incentive payments may also adversely affect participants in the healthcare sector, including us. Generally, Congressional oversight of EHRs and health information technology ~~has~~ increased in recent years, including a specific focus on perceived interoperability failures ~~in the industry,~~ and physician frustration with user burden, as well as any ~~contributive~~contributing factors to such ~~failures,~~dissatisfaction, which could impact our clients and our business. ~~However,~~The passage of the 21^st Century Cures ~~legislation~~Act in December 2016 ~~with components included to address~~assuaged some concerns about interoperability ~~as well as any continued~~and possible FDA oversight of EHRs, but Congressional ~~focus~~ on ~~repealing~~adjusting or ~~adjusting~~defunding the PPACA, ~~may lead~~fraud and abuse enforcement and reducing clinician burden are not likely to a decrease ~~in such activity.~~

~~Starting October 1, 2015, all entities covered by HIPAA were required to have upgraded~~significantly. Further, CMS has proposed changes to the ~~tenth revision~~Evaluation & Management (E&M) coding structure that ties closely to our clients’ requirements to document the care they are delivering prior to payment. We expect these changes may have a positive effect on clinician satisfaction with our EHRs, though the fundamentals of ~~the International Statistical Classification of Diseases and Related Health Problems promulgated by the World Health Organization, also known as ICD-10, for use~~payment will remain in ~~reporting medical diagnoses and inpatient procedures. These changes in coding standards presented a significant opportunity for our clients in the United States~~transition to ~~get to the most advanced versions of our products, but also posed a challenge due to the scale of the challenge for the industry, particularly among smaller independent physician practices.~~ value-based payment models.

New payment and delivery system reform programs, ~~as have been launched~~including those related to the Medicare program, are ~~also~~ increasingly being rolled out at the state level through Medicaid administrators, as well as through the private sector, presenting additional ~~opportunity~~opportunities for us to provide software and services to our clients who participate.

We derive our revenues primarily from sales of our proprietary software (either as a perpetual license sale or under a subscription delivery model), support and maintenance services, and managed services, such as outsourcing, private cloud hosting and revenue cycle management.

We adopted ASC 606 effective on January 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. ASC 606 superseded nearly all existing revenue recognition guidance under GAAP. The core principle of ASC 606 is to recognize revenue when control of promised goods or services is transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Refer to Note 2, “Revenue from Contracts with Customers,” to our consolidated financial statements included in Item I, Part 1, “Financial Statements” of this Form 10-Q for additional information regarding our revenue recognition policies under the new standard and the impact of adoption on our financial position and results of operations as of and for the three and six months ended June 30, 2018.

There were no other material changes to our critical accounting policies and estimates from those previously disclosed in our Form 10-K.

During the ~~third~~second quarter of ~~2017,~~2018, we continued to make incremental progress on our key strategic, financial and operational imperatives aimed at driving higher client satisfaction, improving our competitive position by expanding the depth and breadth of our products and, ultimately, positioning the company for sustainable long-term growth both domestically and globally. Additionally, we believe ~~that~~ there are still opportunities ~~for continuing~~to continue to improve our operating leverage and further streamline our operations and such efforts are ongoing.

Total revenue for the ~~third~~second quarter of ~~2017~~2018 was ~~$449~~$526 million, an increase of ~~15%~~23% compared to the ~~third~~second quarter of ~~2016.~~2017. For the three months ended ~~September~~June 30, ~~2017,~~2018, software delivery, support and maintenance revenue and client services revenue totaled ~~$294~~$337 million, for an increase of ~~16%~~22%, and ~~$155~~$189 million, for an increase of ~~11%~~25%, respectively, as compared with the three months ended ~~September~~June 30, ~~2016~~2017.

Gross profit ~~and gross margin~~ increased during the ~~third~~second quarter of ~~2017~~2018 compared with the ~~prior year comparable period,~~second quarter of 2017, primarily due to improved profitability from ~~the delivery of~~our recurring subscription-based software sales and recurring ~~client~~managed services ~~particularly private-cloud hosting,~~solutions as we continue to expand our customer base for these ~~services. This marks the highest quarterly gross profit and~~services, including through recent acquisitions. Gross margin declined to 40.5% compared with prior year period gross margin ~~that~~of 44.0% primarily due to higher amortization of software development and acquisition-related assets driven by additional amortization expense associated with intangible assets acquired as part of recent acquisitions and higher incentive-based compensation.

As part of our continued focus on improving operational efficiency, during the second quarter of 2018 we ~~have achieved~~mostly completed the migration and integration of the Enterprise Information Solutions Business (the “EIS Business”) systems and solutions into our operations and solutions offerings. This integration included the divestitures of the Strategic Sourcing business, completed in March 2018, and of the ~~last three years.~~OneContent business, completed in April 2018. In connection with these integration efforts and other strategic initiatives, we incurred legal, severance, transaction-related, incentive compensation and other costs totaling $45 million during the second quarter of 2018, compared with $9 million of such costs incurred during the second quarter of 2017.

During the three months ended ~~September~~June 30, ~~2017,~~2018, we recognized a ~~loss on~~non-cash asset impairment charge of $30.1 million related to the ~~disposition~~write-off of ~~available for sale securities~~purchased third-party software as a result of ~~$20.7~~our decision to discontinue several software development projects and long-term investment non-cash impairment charges of $10 million ~~associated with the Company’s disposition~~ related to two of ~~NantHealth, Inc. (“NantHealth”) common stock as consideration for the acquisition of NantHealth’s provider/patient engagement solutions business (as described below).~~our cost-method equity investments.

Our contract backlog as of ~~September~~June 30, ~~2017~~2018 was at a record high of ~~$4.1~~$4.8 billion, ~~and remained unchanged~~slightly above our contract backlog as of December 31, 2017 of $4.7 billion, while increasing 16% compared with contract backlog as of June 30, 2017 ~~while increasing 5% compared with contract backlog as~~ of ~~September 30, 2016.~~$4.1 billion.

Our bookings, which reflect the value of executed contracts for software, hardware, other client services, private-cloud hosting, outsourcing and subscription-based services, totaled ~~$304~~$278 million for the three months ended ~~September~~June 30, ~~2017,~~2018 which represented ~~an increase~~a decrease of 4%32% over the comparable prior period amount of ~~$291~~$407 million and a decrease of ~~25%~~9% from the first quarter of 2018 amount of $304 million. The decrease in bookings compared with prior year was primarily driven by the fact that bookings during the second quarter of 2017 ~~amount of $407 million~~. The growth in bookings compared with the third quarter of 2016 reflects the strong long-term value proposition of our comprehensive offerings, which are targeted across the continuum of care globally. The decline in bookings compared to the second quarter of 2017 in part reflects a normal seasonal fluctuation in customer spending patterns, which generally adversely affect bookings during our third fiscal quarter whereby it is typicallywere one of the ~~lower bookings quarters during the year. Similarly,~~highest in 2016, bookings for the third quarter declined 20% from the second quarter. This pattern should not be relied upon or be considered indicative of our future performance, however, as it has varied in magnitude in the past. New client business totaled approximately one-third of bookings for the third quarter of 2017. recent quarters. The composition of our bookings for the three months ended ~~September~~June 30, ~~2017~~2018 was ~~50%~~51% of client services-related bookings and ~~50%~~49% software delivery-related bookings. The corresponding ratios for the three months ended ~~September~~June 30, ~~2016~~2017 were 49% and 51%, respectively.

During the second quarter of 2018, we returned $44.3 million of cash to our shareholders through the repurchase of 3.6 million shares of our common stock. During the first six months of 2018, we returned $101.9 million of cash to our shareholders through the repurchase of 7.7 million shares of our common stock.

On ~~August 25, 2017, the~~May 18, 2018, we acquired Health Grid Holding Company ~~completed the acquisition of certain assets relating to NantHealth’s provider/~~(“Health Grid”), a patient engagement solutions ~~business. The consideration for the transaction was the 15,000,000 shares of common stock of NantHealth~~provider that ~~had been owned by the Company.~~

On October 2, 2017, Allscripts Healthcare, LLC, a wholly-owned subsidiary of the Company (“Healthcare LLC”), completed the acquisition of McKesson Corporation’s (“McKesson’s”) Enterprise Information Solutions (EIS) Business division (the “EIS Business”), which provides certain software solutions and services toassists independent providers, hospitals and health systems ~~by acquiring all of the outstanding equity interests of two indirect, wholly-owned subsidiaries of McKesson for a purchase price of $185 million, subject~~ to ~~adjustments for net working capital~~improve patient interactions and net debt. The purchase price was funded through incremental borrowings under our debt facilities. Additional information about the acquisition is contained in a Current Report on Form 8-K filed with the SEC by the Company on October 2, 2017.satisfaction.

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Revenue:
Software delivery, support and maintenance	$	294,221		$	252,692			16.4	%	$	845,951		$	731,721			15.6	%	$	336,406		$	275,033			22.3	%	$	666,172		$	543,221			22.6	%
Client services		155,221			139,692			11.1	%		443,057			392,742			12.8	%		189,171			151,058			25.2	%		373,331			296,345			26.0	%
Total revenue		449,442			392,384			14.5	%		1,289,008			1,124,463			14.6	%		525,577			426,091			23.3	%		1,039,503			839,566			23.8	%
Cost of revenue:
Software delivery, support and maintenance		86,893			86,537			0.4	%		259,361			240,860			7.7	%		114,442			89,071			28.5	%		218,852			172,468			26.9	%
Client services		132,629			116,415			13.9	%		379,797			335,957			13.0	%		165,794			122,229			35.6	%		320,562			247,168			29.7	%
Amortization of software development and acquisition-related assets		28,001			23,273			20.3	%		81,788			62,905			30.0	%		32,678			27,300			19.7	%		66,451			53,787			23.5	%
Total cost of revenue		247,523			226,225			9.4	%		720,946			639,722			12.7	%		312,914			238,600			31.1	%		605,865			473,423			28.0	%
Gross profit		201,919			166,159			21.5	%		568,062			484,741			17.2	%		212,663			187,491			13.4	%		433,638			366,143			18.4	%
Gross margin %		44.9	%		42.3	%					44.1	%		43.1	%					40.5	%		44.0	%					41.7	%		43.6	%
Selling, general and administrative expenses		117,352			98,778			18.8	%		340,234			277,733			22.5	%		149,081			112,037			33.1	%		292,151			222,882			31.1	%
Research and development		51,057			45,142			13.1	%		146,748			140,070			4.8	%		80,342			46,459			72.9	%		150,319			95,691			57.1	%
Asset impairment charges		0			0			0.0	%		0			4,650			(100.0	%)		30,075			0		NM				30,075			0		NM
Amortization of intangible and acquisition-related assets		8,137			5,365			51.7	%		23,340			14,944			56.2	%		11,962			7,891			51.6	%		24,210			15,203			59.2	%
Income from operations		25,373			16,874			50.4	%		57,740			47,344			22.0	%
(Loss) income from operations																				(58,797	)		21,104		NM				(63,117	)		32,367		NM
Interest expense		(22,252	)		(19,367	)		14.9	%		(62,722	)		(42,757	)		46.7	%		(26,454	)		(20,290	)		30.4	%		(51,500	)		(40,470	)		27.3	%
Other (loss) income, net		(570	)		(6	)	NM				(545	)		466		NM				(19	)		(214	)		(91.1	%)		(65	)		25		NM
Impairment of and losses on long-term investments		(20,700	)		0			100.0	%		(165,290	)		0			100.0	%
Equity in net (loss) income of unconsolidated investments		449			0		NM				706			(7,501	)		(109.4	%)
Income (loss) before income taxes		(17,700	)		(2,499	)	NM				(170,111	)		(2,448	)	NM
Income tax benefit (provision)		238			2,656			(91.0	%)		1,073			2,596			(58.7	%)
Gain on sale of businesses, net																				173,129			0		NM				172,258			0		NM
Impairment of long-term investments																				(9,987	)		(144,590	)		(93.1	%)		(15,487	)		(144,590	)		(89.3	%)
Equity in net income (loss) of unconsolidated investments																				767			(28	)	NM				706			257			174.7	%
Income (loss) from continuing operations before income taxes																				78,639			(144,018	)		(154.6	%)		42,795			(152,411	)		(128.1	%)
Income tax (provision) benefit																				(3,683	)		1,007		NM				(769	)		835			(192.1	%)
Effective tax rate		1.3	%		106.3	%					0.6	%		106.0	%					4.7	%		0.7	%					1.8	%		0.5	%
Net (loss) income		(17,462	)		157		NM				(169,038	)		148		NM
Income (loss) from continuing operations, net of tax																				74,956			(143,011	)		(152.4	%)		42,026			(151,576	)		(127.7	%)
(Loss) income from discontinued operations, net of tax																				(684	)		0		NM				3,731			0		NM
Net income (loss)																				74,272			(143,011	)		(151.9	%)		45,757			(151,576	)		(130.2	%)
Less: Net loss (income) attributable to non-controlling interest		(163	)		(151	)		7.9	%		(352	)		(142	)		147.9	%		2,700			264		NM				3,490			(189	)	NM
Less: Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart		(10,962	)		(10,191	)		7.6	%		(32,887	)		(18,344	)		79.3	%		(12,148	)		(10,963	)		10.8	%		(24,297	)		(21,925	)		10.8	%
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	(28,587	)	$	(10,185	)		180.7	%	$	(202,277	)	$	(18,338	)	NM
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders																			$	64,824		$	(153,710	)		(142.2	%)	$	24,950		$	(173,690	)		(114.4	%)

NM – We define “NM” as not meaningful for increases or decreases greater than 200%.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,							Six Months Ended June 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change			2018		2017		% Change			2018		2017		% Change
Revenue:
Software delivery, support and maintenance
Recurring revenue	$	235,560	$	213,921		10.1	%	$	694,914	$	616,325		12.8	%	$	292,991	$	224,078		30.8	%	$	587,446	$	451,528		30.1	%
Non-recurring revenue		58,661		38,771		51.3	%		151,037		115,396		30.9	%		43,415		50,955		(14.8	%)		78,726		91,693		(14.1	%)
Total software delivery, support and maintenance		294,221		252,692		16.4	%		845,951		731,721		15.6	%		336,406		275,033		22.3	%		666,172		543,221		22.6	%
Client services
Recurring revenue		104,100		92,983		12.0	%		300,600		254,181		18.3	%		134,385		99,136		35.6	%		256,859		200,915		27.8	%
Non-recurring revenue		51,121		46,709		9.4	%		142,457		138,561		2.8	%		54,786		51,922		5.5	%		116,472		95,430		22.0	%
Total client services		155,221		139,692		11.1	%		443,057		392,742		12.8	%		189,171		151,058		25.2	%		373,331		296,345		26.0	%
Total revenue	$	449,442	$	392,384		14.5	%	$	1,289,008	$	1,124,463		14.6	%	$	525,577	$	426,091		23.3	%	$	1,039,503	$	839,566		23.8	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

The increase in revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 is~~2018 compared with the prior year comparable periods was primarily ~~due to~~driven by incremental revenue from the ~~consolidation~~acquisitions of ~~Netsmart beginning in~~ the ~~second quarter~~EIS Business, Practice Fusion and Netsmart’s acquisition of ~~2016, including lower~~DeVero. The EIS Business contributed $73 million and $162 million of revenue for the three and six months ended June 30, 2018, respectively, excluding $10 million of revenue associated with discontinued operations for the six months ended June 30, 2018. These increases were partly offset by higher amortization of acquisition-related deferred revenue ~~adjustment related to~~adjustments, which totaled $10 million and $15 million, respectively, during the ~~Netsmart acquisition totaling~~three and six months ended June 30, 2018, compared with the prior year comparable periods totals of $1 million and $4$3 million, ~~for the three and nine months ended September 30, 2017, respectively, compared with $12 million and $22 million for the three and nine months ended September 30, 2016,~~ respectively.

Software delivery, support and maintenance revenue consists of recurring subscription-based software sales, support and maintenance revenue, recurring transactions revenue, ~~and~~ non-recurring perpetual software licenses sales, hardware resale and non-recurring transactions revenue. Client services revenue consists of recurring revenue from managed services solutions, such as outsourcing, private cloud hosting and revenue cycle management, as well as non-recurring project-based client services revenue. The growth in ~~both~~ recurring ~~and non-recurring~~ software delivery, support and maintenance and overall client services revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable periods was also largely driven by incremental revenue from ~~Netsmart~~the above mentioned recent acquisitions. The decrease in non-recurring software delivery, support and maintenance revenue was primarily driven by fewer perpetual software license sales of our acute and post-acute solutions as ~~well as higher revenue associated with~~ the ~~sale of Allscripts integrated clinical software applications and health management and coordinated care solutions, including associated client services to implement and support these solutions.~~prior year periods included several large transactions which did not recur in the current year.

The percentage of recurring and non-recurring revenue of our total revenue was ~~76%~~81% and ~~24% and 77% and 23%~~19%, respectively, during both the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~2018, representing a slight shift compared with 76% and 24% and 78% and 22% ~~and 77% and 23%~~, respectively, during the ~~three and nine months ended September 30, 2016.~~comparable prior year periods.

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Total cost of revenue	$	247,523		$	226,225			9.4	%	$	720,946		$	639,722			12.7	%	$	312,914		$	238,600			31.1	%	$	605,865		$	473,423			28.0	%
Gross profit	$	201,919		$	166,159			21.5	%	$	568,062		$	484,741			17.2	%	$	212,663		$	187,491			13.4	%	$	433,638		$	366,143			18.4	%
Gross margin %		44.9	%		42.3	%					44.1	%		43.1	%					40.5	%		44.0	%					41.7	%		43.6	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Gross profit ~~and gross margin~~ increased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable periods primarily due to the ~~consolidation of Netsmart beginning in the second quarter of 2016 and improved profitability from~~above mentioned recent acquisitions. From a revenue mix perspective, gross profit associated with our recurring revenue streams, which include the delivery of recurring subscription-based software sales, support and maintenance, and recurring client services ~~particularly private cloud hosting,~~improved as we ~~continue~~continued to expand our customer base for these ~~services. Additionally, gross~~services, particularly those related to outsourcing and revenue cycle management. Gross profit ~~and gross margin for the nine months ended September 30, 2017 increased due to improved profitability from~~associated with our non-recurring software delivery, support and maintenance revenue stream decreased primarily ~~associated with~~due to fewer perpetual software license sales of our acute and post-acute solutions. ~~These increases were partly offset by lower gross~~Gross profit ~~and gross margin~~ associated with ~~the delivery of~~our non-recurring client services revenue stream, which includes non-recurring project-based client services, ~~as well as~~decreased primarily driven by higher utilization of third-party resources and higher internal personnel costs. Gross margin decreased primarily due to

higher incentive-based compensation and higher amortization of software development and acquisition-related assets ~~compared~~driven by additional amortization expense associated with ~~prior year.~~
intangible assets acquired as part of recent acquisitions.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,							Six Months Ended June 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change			2018		2017		% Change			2018		2017		% Change
Selling, general and administrative expenses	$	117,352	$	98,778		18.8	%	$	340,234	$	277,733		22.5	%	$	149,081	$	112,037		33.1	%	$	292,151	$	222,882		31.1	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Selling, general and administrative expenses increased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable periods, primarily due to ~~additional personnel~~higher incentive-based compensation and incremental expenses from the acquisitions ~~completed during 2016, including~~of the ~~Netsmart Transaction in the second quarter~~EIS Business, Practice Fusion, and Netsmart’s acquisition of ~~2016, as well as~~DeVero. We also incurred higher transaction-related, severance and legal ~~expenses.~~expenses as a result of these acquisitions.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,							Six Months Ended June 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change			2018		2017		% Change			2018		2017		% Change
Research and development	$	51,057	$	45,142		13.1	%	$	146,748	$	140,070		4.8	%	$	80,342	$	46,459		72.9	%	$	150,319	$	95,691		57.1	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Research and development ~~expense~~expenses increased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable periods, primarily due to higher overall personnel costs, including higher incentive-based compensation, and additional expenses from ~~Netsmart~~the acquisitions of the EIS Business and Netsmart’s acquisition of DeVero, which were partly offset by an increase in the amount of capitalized software costs. The increase in research and development expenses during the three and six months ended June 30, 2018 was also partially mitigated by our continued efforts to streamline our operations and improve operational efficiency, including headcount actions taken during the second half of 2017. The increase in capitalized software development costs was primarily driven by our continued investment in ~~2017 compared with 2016 periods.~~expanding the capabilities and functionality of our traditional ambulatory, acute and post-acute platforms as well as incremental investments in the emerging areas of precision medicine and cloud-based solution delivery. The capitalization of software development costs is highly dependent on the nature of the work being performed and the development status of projects and, therefore, it is common for the amount of capitalized software development costs to fluctuate.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change			2018		2017		% Change	2018		2017		% Change
Asset impairment charges	$	0	$	0		0.0	%	$	0	$	4,650		(100.0	%)	$	30,075	$	0	NM	$	30,075	$	0	NM
Impairment of and losses on long-term investments	$	20,700	$	0		100.0	%	$	165,290	$	0		100.0	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

During the ~~first quarter of 2016,~~three and six months ended June 30, 2018, we ~~incurred~~recognized non-cash asset impairment charges ~~that included $2.2 million for~~ related to the ~~impairment~~write-off of ~~capitalized~~purchased third-party software as a result of our decision to discontinue several software development ~~projects, $2.1 million~~projects.

Three and Six Months Ended June 30, 2018 Compared with the Three and Six Months Ended June 30, 2017

The increase in amortization expense for the ~~impairment~~three and six months ended June 30, 2018 compared with the prior year comparable periods was primarily due to incremental amortization expense associated with intangible assets acquired as part of ~~one~~business acquisitions completed during the second half of 2017 and the first half of 2018, the largest being the acquisitions of the EIS Business and Practice Fusion. Refer to Note 3, “Business Combinations” to our consolidated financial statements included in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information regarding business acquisitions.

Three and Six Months Ended June 30, 2018 Compared with the Three and Six Months Ended June 30, 2017

Interest expense during the three and six months ended June 30, 2018 increased compared with the prior year comparable periods primarily due to the combination of higher outstanding borrowings under Allscripts and Netsmart’s credit facilities, and higher interest rates. The higher outstanding borrowings were largely due to additional borrowings to finance the acquisition of the EIS Business during the fourth quarter of 2017 and the acquisitions of Practice Fusion and Health Grid during the first half of 2018.

Three and Six Months Ended June 30, 2018 Compared with the Three and Six Months Ended June 30, 2017

Other (loss) income, net for the three and six months ended June 30, 2017 and 2018 consisted of a combination of interest income, miscellaneous receipts and expenses.

Three and Six Months Ended June 30, 2018 Compared with the Three and Six Months Ended June 30, 2017

Gain on sale of businesses, net for the three and six months ended June 30, 2018 consists of a gain of $177.9 million and a loss of $5.6 million from the divestitures of the OneContent and Strategic Sourcing businesses, respectively, both of which were acquired as part of the EIS transaction during the fourth quarter of 2017.

Three and Six Months Ended June 30, 2018 Compared with the Three and Six Months Ended June 30, 2017

During the three and six months ended June 30, 2018, we recognized non-cash charges related to two of our ~~cost method~~cost-method equity investments and ~~other~~a related note receivable. These charges equaled the cost bases of ~~$0.4 million~~the investments and the related note receivable prior to ~~write down a long-term asset to its estimated net realizable value.~~

the impairment. During the three and six months ended June 30, 2017, we recognized other-than-temporary non-cash impairment charges, ~~of $144.6 million associated with two of the Company’s long-term investments~~primarily related to our investment in NantHealth common stock, based on management’s assessment of the likelihood of near-term recovery of ~~the investments’ value. The majority of these impairment charges related to our investment in NantHealth common stock.~~

~~During the three months ended September 30, 2017, we recognized a loss of $20.7 million upon the disposition of our entire investment in NantHealth common stock. Refer to~~ ~~Note 3, “Fair Value Measurements and Long-term Investments” and~~ Note 11, “Other Comprehensive Income,” in the notes to consolidated financial statements for further information regarding these impairments. Refer to Note 2, “Business Combinations,” for information regarding the divestiture of our investment in NantHealth common stock as part of our acquisition of NantHealth’s provider/patient engagement solutions business.

~~Three and Nine Months Ended September 30, 2017 Compared with the Three and Nine Months Ended September 30, 2016~~

The increase in amortization expense for the three and nine months ended September 30, 2017 compared with the prior year comparable periods was primarily driven by additional amortization expense associated with the value of intangible assets recognized

~~in connection with the Netsmart Transaction in the second quarter of 2016 and the acquisitions of HealthMEDX and controlling interests in third parties during the fourth quarter of 2016.~~

~~Three and Nine Months Ended September 30, 2017 Compared with the Three and Nine Months Ended September 30, 2016~~

Interest expense during the three and nine months ended September 30, 2017 was higher compared with the prior year comparable periods, primarily due to incremental interest expense associated with Netsmart’s non-recourse debt, including interest on the incremental borrowing in the third quarter of 2017 to fund the DeVero acquisition. In addition, interest expense associated with Allscripts senior secured credit facility also increased primarily due to higher outstanding balance compared with the 2016 periods.

~~Three and Nine Months Ended September 30, 2017 Compared with the Three and Nine Months Ended September 30, 2016~~

~~Other (loss) income, net for the three and nine months ended September 30, 2017 and 2016 consists of miscellaneous (payments) receipts.~~this investment.

	Three Months Ended September 30,					Nine Months Ended September 30,								Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017		2016		% Change	2017		2016			% Change			2018		2017			% Change	2018		2017		% Change
Equity in net (loss) income of unconsolidated investments	$	449	$	0	NM	$	706	$	(7,501	)		(109.4	%)
Equity in net income (loss) of unconsolidated investments														$	767	$	(28	)	NM	$	706	$	257		174.7	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Equity in net (loss) income of unconsolidated investments represents our share of the equity earnings (losses) ~~earnings~~ of our investments in third parties accounted for under the equity method ~~including the amortization~~ of cost basis adjustments. The amount recognized during the nine months ended September 30, 2016 represents our share of the net loss incurred by NantHealth prior to NantHealth’s initial public offering (“IPO”) in June 2016. Our investment in NantHealth common stock was accounted for as an available-for-sale marketable security after the IPO.accounting.

	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change			2018			2017		% Change	2018			2017		% Change
Income tax benefit (provision)	$	238	$	2,656		(91.0	%)	$	1,073	$	2,596		(58.7	%)
Income tax (provision) benefit															$	(3,683	)	$	1,007	NM	$	(769	)	$	835		(192.1	%)

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

The United States Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduced significant changes to the income tax law in the United States. Effective in 2018, the Tax Act reduces the United States statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the Global Intangible Low-taxed Income ("GILTI") tax and Base Erosion and Anti-Abuse Tax (“BEAT”), respectively. In addition, in 2017 we were subject to a one-time transition tax on accumulated foreign subsidiary earnings not previously subject to income tax in the United States.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional benefit of $20.8 million in our financial statements for the year ended December 31, 2017 in accordance with guidance in Staff Accounting Bulletin No. 118 (“SAB 118”), which allows a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. This provisional benefit includes $26 million benefit for remeasurement of deferred tax balances to reflect the lower federal rate and expense of $5.2 million for the one-time transition tax on accumulated foreign subsidiary earnings not previously subject to income tax in the United States. We will complete our analysis of the Tax Act during 2018, and any needed adjustments to the provisional amounts will be included in income tax expense or benefit in the appropriate period, in accordance with SAB 118. We are continuing to assess the impacts of the Tax Act on the 2018 effective tax rate and income tax accounting, particularly the new GILTI and BEAT tax rules.

Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to valuation allowance, permanent differences, income attributable to foreign jurisdictions taxed at ~~lower~~ rates different from the United States federal statutory rate, state taxes, tax credits and certain discrete items. Our effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, compared with the prior year comparable ~~periods,~~period, differs primarily due to ~~$64.2~~the reduced United States federal statutory rate, the estimated impact of the GILTI and BEAT provisions and the stricter executive compensation deduction provisions of the Tax Act, reflected in the provision for the three and six months ended June 30, 2018.

In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). In the six months ended June 30, 2018, we released $17.4 million of valuation allowance, inmostly due to the ~~nine months ended September 30, 2017 for deferred taxes on a~~utilization of capital loss carryforward ~~which can only can be deductible to~~against capital gain incurred in the ~~extent of offsetting capital gains.~~
six months ended June 30, 2108.

Three and ~~Nine~~Six Months ~~Ended September~~ended June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

The (loss) income from discontinued operations, net of tax, for the three and six months ended June 30, 2018 represents the net earnings attributable to two solutions acquired during the fourth quarter of 2017 as part of the EIS Business that we no longer support effective as of March 31, 2018. Refer to Note 13, “Discontinued Operations” to our consolidated financial statements included in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information regarding discontinued operations.

Three and Six Months Ended June 30, 2018 Compared with the Three and Six Months Ended June 30, 2017

The net ~~(loss) income~~loss (income) attributable to non-controlling interest represents the share of earnings of consolidated affiliates that is attributable to the ~~affiliate’s~~affiliates’ common stock that is not owned by us for each of the periods presented. The accretion of redemption preference on redeemable convertible non-controlling interest represents the accretion of liquidation preference at 11% per annum to the value of the preferred units of Netsmart for each of the periods presented. Refer to Note 2, “Business Combinations and Other Investments” to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of our Form 10-K for additional information regarding such liquidation preference.

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Revenue:
Clinical and Financial Solutions	$	303,323		$	276,503			9.7	%	$	870,452		$	830,200			4.8	%	$	389,497		$	304,111			28.1	%	$	763,476		$	600,291			27.2	%
Population Health		60,515			61,722			(2.0	%)		179,313			170,803			5.0	%		57,068			42,508			34.3	%		126,773			85,937			47.5	%
Netsmart		83,618			52,621			58.9	%		235,046			96,854			142.7	%		86,366			78,421			10.1	%		168,852			151,428			11.5	%
Unallocated Amounts		1,986			1,538			29.1	%		4,197			26,606			(84.2	%)		(7,805	)		1,051		NM				(9,753	)		1,910		NM
Discontinued Operations																				451			0		NM				(9,845	)		0		NM
Total revenue	$	449,442		$	392,384			14.5	%	$	1,289,008		$	1,124,463			14.6	%	$	525,577		$	426,091			23.3	%	$	1,039,503		$	839,566			23.8	%

Gross Profit:
Clinical and Financial Solutions	$	130,224		$	113,677			14.6	%	$	363,228		$	349,017			4.1	%	$	165,073		$	126,810			30.2	%	$	319,722		$	246,691			29.6	%
Population Health		41,947			46,337			(9.5	%)		125,535			125,152			0.3	%		41,369			34,909			18.5	%		94,575			70,818			33.5	%
Netsmart		39,644			17,378			128.1	%		111,489			32,327		NM				38,877			37,271			4.3	%		75,178			71,845			4.6	%
Unallocated Amounts		(9,896	)		(11,233	)		(11.9	%)		(32,190	)		(21,755	)		48.0	%		(33,053	)		(11,499	)		187.4	%		(49,143	)		(23,211	)		111.7	%
Discontinued Operations																				397			0		NM				(6,694	)		0		NM
Total gross profit	$	201,919		$	166,159			21.5	%	$	568,062		$	484,741			17.2	%	$	212,663		$	187,491			13.4	%	$	433,638		$	366,143			18.4	%

Income (loss) from operations:
Clinical and Financial Solutions	$	68,837		$	59,921			14.9	%	$	186,846		$	188,145			(0.7	%)	$	79,501		$	75,501			5.3	%	$	161,648		$	138,273			16.9	%
Population Health		29,298			32,977			(11.2	%)		86,282			81,895			5.4	%		26,587			27,884			(4.7	%)		63,106			56,562			11.6	%
Netsmart		7,153			(6,426	)	NM				23,910			(8,825	)	NM				1,219			7,828			(84.4	%)		3,532			16,757			(78.9	%)
Unallocated Amounts		(79,915	)		(69,598	)		14.8	%		(239,298	)		(213,871	)		11.9	%		(167,028	)		(90,109	)		85.4	%		(286,361	)		(179,225	)		59.8	%
Total income from operations	$	25,373		$	16,874			50.4	%	$	57,740		$	47,344			22.0	%
Discontinued Operations																				924			0		NM				(5,042	)		0		NM
Total (loss) income from operations																			$	(58,797	)	$	21,104		NM			$	(63,117	)	$	32,367		NM

Our Clinical and Financial Solutions segment derives its revenue from the sale of integrated clinical software applications and financial and information solutions, which primarily include EHR-related software, connectivity and coordinated care solutions, financial and practice management software, related installation, support and maintenance, outsourcing, private cloud hosting, revenue cycle management, training and electronic claims administration services.

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Revenue	$	303,323		$	276,503			9.7	%	$	870,452		$	830,200			4.8	%	$	389,497		$	304,111			28.1	%	$	763,476		$	600,291			27.2	%
Gross profit	$	130,224		$	113,677			14.6	%	$	363,228		$	349,017			4.1	%	$	165,073		$	126,810			30.2	%	$	319,722		$	246,691			29.6	%
Gross margin %		42.9	%		41.1	%					41.7	%		42.0	%					42.4	%		41.7	%					41.9	%		41.1	%
Income from operations	$	68,837		$	59,921			14.9	%	$	186,846		$	188,145			(0.7	%)	$	79,501		$	75,501			5.3	%	$	161,648		$	138,273			16.9	%
Operating margin %		22.7	%		21.7	%					21.5	%		22.7	%					20.4	%		24.8	%					21.2	%		23.0	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Clinical and Financial Solutions revenue, gross profit and income from operations increased during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable periods, as higher revenue from recurring software delivery, support and maintenance, and recurring ~~revenue cycle management~~ and ~~other transaction-based services and private cloud hosting~~non-recurring client services ~~were~~was partly offset by lower non-recurring client services revenue. The higher software delivery, support and maintenance revenue was driven by increases in both recurring subscription-based revenue and non-recurring software license sales of our acute solutions. During the 2017 periods compared with the respective 2016 periods, there was a higher number of larger acute client expansions, which drove the increase in non-recurring software delivery, support and maintenance revenue. The increase in ~~revenue cycle management~~overall segment revenue was ~~due to~~primarily as a result of the ~~activation~~acquisitions of several new accounts, which more than offset certain other projects that ended in 2016. Revenue related to private cloud hosting also increased primarily due to new ambulatory client go-lives. The decrease in non-recurring client services revenue was partly due to the ~~realization~~EIS Business during the fourth quarter of ~~certain deferred revenue amounts~~2017 and Practice Fusion during the first quarter of ~~2016 that did not re-occur in 2017. In addition, non-recurring client services~~2018, which combined contributed $82 million and $166 million of revenue was lower as result of a decrease in implementation services attributable to fewer large implementations of our ambulatory and acute solutions as certain large service projects were mostly completed in 2016.

~~Gross profit and gross margin increased~~ during the three and six months ended ~~September~~June 30, ~~2017~~2018, respectively, including $10 million of revenue associated with discontinued operations during the six months ended June 30, 2018. The decrease in non-recurring software delivery, support and maintenance revenue was primarily driven by fewer perpetual software license sales of our acute and post-acute solutions as the prior year periods included several large transactions which did not recur in the current year.

Gross margin improved during the three and six months ended June 30, 2018 compared with the prior year comparable period primarily due to ~~a favorable mix of~~gross profit from the EIS Business and Practice Fusion, which had higher average gross margins compared with our existing businesses included within the Clinical and Financial Solutions segment. Operating margin software license sales and transaction-processing revenue, partly offset by higher amortization of capitalized software development and acquired technology-related intangible assets. Income from operations and operating margin increaseddeclined due to ~~the same factors~~increases in selling general and ~~an improved operating leverage.~~

Gross margin and operating margin decreased during the nine months ended September 30, 2017 compared with the prior year comparable period, primarily due to the decrease in non-recurring client services revenue, a greater reliance on third-party products and services, higher internal costs related to anticipated new outsourcing clients go-lives and higher amortization of capitalized software development and acquired technology-related intangible assets. In addition, overall operating expenses increased primarily due to higher personnel costsadministrative, and research and development ~~expenses. These decreases were partly offset~~expenses, mostly driven by ~~certain credits related~~recent acquisitions and additional investment to expand the capabilities and functionality of our ~~hosting partners during the nine months ended September 30, 2017 as compared to the prior year comparable period.~~ traditional ambulatory and acute platforms.

Our Population Health segment derives its revenue from the sale of health management, financial management and ~~coordinated care~~patient engagement solutions, which are mainly targeted at hospitals, health systems, other care facilities and ACOs. These solutions enable clients to ~~connect,~~ transition, analyze and coordinate care across the entire care community. This segment also ~~includes~~provides document, content and supply chain management solutions through the ~~results~~EIS-EWS business acquired with the EIS Business acquisition. Refer to Note 3, “Business Combinations” to our consolidated financial statements included in Part I, Item 1, “Financial Statements” of ~~NantHealth’s provider/patient engagement solutions~~this Form 10-Q for additional information regarding the sale of the Strategic Sourcing and OneContent business ~~subsequent to August 25, 2017,~~units, respectively, which ~~were not material for~~together comprised a substantial majority of the ~~three months ended September 30, 2017.~~EIS-EWS operating segment.

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Revenue	$	60,515		$	61,722			(2.0	%)	$	179,313		$	170,803			5.0	%	$	57,068		$	42,508			34.3	%	$	126,773		$	85,937			47.5	%
Gross profit	$	41,947		$	46,337			(9.5	%)	$	125,535		$	125,152			0.3	%	$	41,369		$	34,909			18.5	%	$	94,575		$	70,818			33.5	%
Gross margin %		69.3	%		75.1	%					70.0	%		73.3	%					72.5	%		82.1	%					74.6	%		82.4	%
Income from operations	$	29,298		$	32,977			(11.2	%)	$	86,282		$	81,895			5.4	%	$	26,587		$	27,884			(4.7	%)	$	63,106		$	56,562			11.6	%
Operating margin %		48.4	%		53.4	%					48.1	%		47.9	%					46.6	%		65.6	%					49.8	%		65.8	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Population Health revenue and gross profit increased during the three and six months ended June 30, 2018 compared with the prior year comparable periods, primarily driven by the acquisition of the EIS Business during the fourth quarter of 2017, which contributed $6 million and $30 million of revenue, respectively, during the three and six months ended June 30, 2018. The remainder of the increase was primarily due to increased sales of our patient engagement and financial management solutions, including associated client services to implement and support these solutions. Additional revenue and gross profit from the acquisition of Health Grid in May 2018 also contributed to these increases. Income from operations decreased slightly during the three months ended ~~September~~June 30, ~~2017 compared with the prior year comparable period~~2018, primarily due to ~~lower recurring software delivery, support~~timing of operating expenses.

Gross margin and maintenance revenue and non-recurring project-related client services revenue, which were mostly offset by higher non-recurring software delivery, support and maintenance revenue associated with client expansion and new client sales of population health solutions. The decline in recurring software delivery, support and maintenance revenue was due to the realization of certain deferred revenue amounts upon delivery of all software-related elements associated with a large customer contract during the third quarter of 2016, which did not recur during the third quarter of 2017. Gross profit and grossoperating margin decreased primarily due to ~~higher utilization of third party resources and higher amortization of capitalized software. Income from operations and operating margin also decreased due to~~ the ~~same factors, partly offset by an overall decline~~EIS-EWS business, which had lower margins compared with our existing solutions in ~~operating expenses.~~

the Population Health revenue increased during the nine months ended September 30, 2017 compared with the prior year comparable period, primarily due to higher non-recurring software delivery, support and maintenance revenue associated with client expansion and new client sales of our CareInMotion™ population health management portfolio and non-recurring project-related client services revenue. These increases were partly offset by lower recurring software delivery, support and maintenance revenue, mostly driven by the deferred revenue release as noted in the above paragraph. Gross margin decreased ~~primarily due to an unfavorable mix of lower margin projects utilizing third party resources in addition to slightly higher third-party expenses associated with new solutions and~~ segment.~~higher amortization of capitalized software development~~ ~~and acquired technology-related intangible assets.~~ ~~Income from operations and operating margin increased primarily due to an overall decline in operating expenses, including higher capitalization of internal software development expenses.~~

Our Netsmart segment ~~is a new segment that~~ was established as part of the Netsmart Transaction and ~~was initially comprised of~~includes the ~~combination of~~Netsmart business, our prior Homecare^TM business, ~~with Netsmart, Inc. The Netsmart segment also includes the results of~~ HealthMEDX, LLC and DeVero, Inc., which were acquired subsequent to the Netsmart Transaction. ~~Refer to Note 2, “Business Combinations” for further details regarding the acquisition of these businesses.~~ The Netsmart segment operates in and provides software and technology solutions to the health and human services and post-acute sectors of health care throughout the United States. The health and human services sector comprises behavioral health, addiction treatment, intellectual and developmental disability services, child and family services and public health market segments. The post-acute sector includes homecare and long-term care which is comprised of home health, hospice, private duty, assisted living and skilled nursing. The human services, home care and long-term care markets combined represent the second largest category of health care spending in the United States.

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,									Six Months Ended June 30,
(In thousands)	2017			2016			% Change			2017			2016			% Change			2018			2017			% Change			2018			2017			% Change
Revenue	$	83,618		$	52,621			58.9	%	$	235,046		$	96,854			142.7	%	$	86,366		$	78,421			10.1	%	$	168,852		$	151,428			11.5	%
Gross profit	$	39,644		$	17,378			128.1	%	$	111,489		$	32,327		NM			$	38,877		$	37,271			4.3	%	$	75,178		$	71,845			4.6	%
Gross margin %		47.4	%		33.0	%					47.4	%		33.4	%					45.0	%		47.5	%					44.5	%		47.4	%
Income from operations	$	7,153		$	(6,426	)	NM			$	23,910		$	(8,825	)	NM			$	1,219		$	7,828			(84.4	%)	$	3,532		$	16,757			(78.9	%)
Operating margin %		8.6	%		(12.2	%)					10.2	%		(9.1	%)					1.4	%		10.0	%					2.1	%		11.1	%

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Revenue for the three and ~~nine~~six months ended ~~September~~June 30, 2018 and 2017 includes two revenue categories, business services and system sales. Business services includes both subscription revenue and services and support revenue. System sales includes revenue from software licenses, sold either as perpetual licenses or fixed-term licenses, and revenue from third party software licenses and hardware products.

Revenue for the three and six months ended ~~September~~June 30, ~~2017~~2018 increased compared with the prior year comparable ~~period,~~periods, primarily ~~due to~~driven by sales to both existing clients as well as new footprints and incremental revenue from the ~~acquisitions~~acquisition of ~~HealthMEDX during the fourth quarter of 2016 and~~ DeVero during the third quarter of 2017. In addition, total revenue for the three and six months ended ~~September~~June 30, ~~2017 and 2016~~2018 was reduced by $1$0 million and ~~$12~~$1 million, respectively, due to the impact of acquisition-related deferred revenue adjustments related to ~~the Netsmart Transaction.~~

~~Revenue~~prior acquisitions. The corresponding amounts for the ~~nine~~three and six months ended ~~September~~June 30, 2017 were $1 million and $3 million, respectively.

Gross profit improved during the three and six months ended June 30, 2018 compared with the prior year comparable period also increased primarily due to the same factors that drove the quarterly growth in revenue as noted in the above paragraph. Total revenue for the nine months ended September 30, 2017 and 2016 was reduced by $4 million and $22 million, respectively, due to the impact of acquisition-related deferred revenue adjustments related to the Netsmart Transaction. In addition, revenue for the nine months ended September 30, 2017 increased due to the 2016 comparable period only including results of Netsmart since the date of the Netsmart Transaction in April 2016. Furthermore, the results of the Homecare^TM ~~business are included in the Netsmart reportable segment in~~

~~the current year period and for a portion of the 2016 period and in the Unallocated Amounts category for the 2016 period prior to the date of the Netsmart Transaction.~~

~~Gross profit and gross margin improved during the three and nine months ended September 30, 2017,~~periods, primarily driven by higher revenue from ~~Netsmart license sales~~our recurring revenue streams and operational efficiencies as well as the impact of lower acquisition-related deferred revenue adjustments in the ~~2017 periods~~2018 period as compared with the ~~2016 periods.~~2017 period. Gross margin decreased due to a higher mix of business services relative to systems sales in the current year period. Income from operations and operating margin ~~improved as a result of~~decreased during the ~~above revenue increases~~three and ~~gross margin improvements partly offset by increased expenses related~~six months ended June 30, 2018 compared with the prior year comparable periods due to the ~~acquired businesses.~~ decrease in margin driven by change in sales mix from system sales to a higher concentration of business services, increased operating expenses driven by business growth, and higher intangible amortization and stock-based compensation expense. The change in sales mix was driven by a historically high number of large system sales transactions in the first six months of 2017 versus the first six months of 2018.

In determining revenue, gross profit and income from operations for our segments, with the exception of the Netsmart segment, we do not include in revenue the amortization of acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in a business acquisition. With the exception of the Netsmart segment, we also exclude the amortization of intangible assets, stock-based compensation expense, non-recurring expenses and transaction-related costs, and non-cash asset impairment charges from the operating segment data provided to our CODM. Non-recurring expenses relate to certain severance, product consolidation, legal, consulting and other charges incurred in connection with activities that are considered one-time. Accordingly, these amounts are not included in our reportable segment results and are included in the “Unallocated Amounts” category. The “Unallocated Amounts” category also includes (i) corporate general and administrative expenses (including marketing expenses), and certain research and development expenses related to common solutions and resources that benefit all of our business units, all of which are centrally managed, ~~as well as~~and (ii) revenue and the associated cost from the resale of certain ancillary products, primarily hardware, other than the respective amounts associated with the Netsmart segment. ~~The historical results of our Homecare~~^TM ~~business prior to the Netsmart Transaction are also included in the “Unallocated Amounts” category.~~ The Netsmart segment, as presented, includes all revenue and expenses incurred by Netsmart since it operates as a stand-alone business entity and its resources allocation and performance are reviewed and measured at such all-inclusive level. The eliminations of intercompany transactions between Allscripts and Netsmart are also included in the “Unallocated Amounts” category.

Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Revenue from the resale of ancillary products, primarily consisting of hardware, is customer and project driven and, as a result, can fluctuate from period to period. Revenue for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable ~~period~~periods decreased primarily due to the ~~results~~recognition of ~~our Homecare~~^TM ~~business being included~~amortization of acquisition-related deferred revenue adjustments, which reflect the fair value adjustments to deferred revenues acquired in the ~~Netsmart reportable segment for the 2017 period~~EIS Business, Practice Fusion and ~~in the Unallocated Amounts category for the 2016 period. Revenue~~NantHealth provider/patient engagement acquisitions. Such adjustments totaled $10 million and $15 million, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 includes the elimination of $2~~2018 compared with $1 million and $7$3 million, respectively, ~~of revenue associated with transactions between Allscripts and Netsmart, while revenue~~ for the ~~three and nine months ended September 30, 2016 includes eliminations of $2 million and $4 million, respectively.~~prior year comparable periods. Hardware revenue for the three and ~~nine~~ months ended ~~September~~June 30, ~~2017~~2018 was ~~essentially flat~~slightly lower compared with the ~~three and nine months ended September 30, 2016.~~prior year comparable periods.

Gross unallocated expenses, which represent the unallocated loss from operations excluding the impact of revenue, totaled ~~$82~~$159 million and ~~$243~~$277 million, respectively, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~2018 compared ~~to $71~~with $91 million and ~~$241~~$181 million, respectively, for ~~the three and nine months ended September 30, 2016, respectively. The increases during the three and nine months ended September 30, 2017 compared with~~ the prior year comparable ~~periods were~~periods. The increase for the three months ended June 30, 2018 compared with the comparable prior year period was primarily driven by ~~an increase in selling, general~~(i) asset impairment charges of $30 million recorded during the current period, (ii) higher incentive-based compensation, and ~~administrative expenses due to higher~~ (iii) transaction-related, severance and legal ~~expenses.~~expenses primarily related to the acquisitions of the EIS Business, Practice Fusion and Health Grid totaling $36 million. The increase for the six months ended June 30, 2018 compared with the comparable prior year period was primarily driven by the same factors, including asset impairment charges of $30 million, higher incentive-based compensation and transaction-related, severance and legal expenses of $46 million, higher amortization of intangible and acquisition-related asset of $12 million, and higher research and development expenses of $11 million. The increase in ~~selling, general and administrative expenses~~amortization expense was primarily due to additional amortization expense associated with intangible assets acquired as part of business acquisitions completed during the ~~nine months ended September 30,~~second half of 2017 ~~compared with~~and the ~~prior year comparable period was offset by a $12 million decrease in cost~~first half of ~~revenue, which was partly due to~~ ~~the results of our Homecare~~^TM ~~business being included in the Netsmart reportable segment in the current year period and in the Unallocated Amounts category for the 2016 period prior to the Netsmart Transaction.~~ ~~In addition, the nine months ended September 30, 2016 include a $5 million asset impairment charge which did not recur during the corresponding 2017 period.~~
2018.

Contract backlog represents the value of bookings and support and maintenance contracts that have not yet been recognized as revenue. A summary of contract backlog by revenue category is as follows:

	As of		As of		As of		% Change from September 30, 2017
	September 30,		December 31,		September 30,		December 31,			September 30,									% Change vs. June 30, 2018
(In millions)	2017		2016		2016		2016			2016			As of June 30, 2018		As of December 31, 2017		As of June 30, 2017		December 31, 2017			June 30, 2017
Software delivery, support and maintenance	$	2,384	$	2,379	$	2,300		0.2	%		3.7	%	$	2,818	$	2,748	$	2,401		2.5	%		17.4	%
Client services		1,724		1,671		1,622		3.2	%		6.3	%		1,950		1,899		1,707		2.7	%		14.2	%
Total contract backlog	$	4,108	$	4,050	$	3,922		1.4	%		4.7	%	$	4,768	$	4,647	$	4,108		2.6	%		16.1	%

Total contract backlog as of ~~September~~June 30, ~~2017 increased~~2018 was slightly higher compared with December 31, ~~2016~~2017 and ~~September~~increased compared with June 30, ~~2016.~~2017, which was partly due to the impact of recent acquisitions. Total contract backlog can fluctuate between periods based on the level of revenue and bookings as well as the timing and mix of renewal activity and periodic revalidations.

The primary factors that influence our liquidity include, but are not limited to, the amount and timing of our revenues, cash collections from our clients, capital expenditures and investments in research and development efforts, including investments in or acquisitions of third-parties. As of ~~September~~June 30, ~~2017,~~2018, our principal sources of liquidity consisted of cash and cash equivalents of ~~$104 million, net of restricted cash of $5~~$141 million and available borrowing capacity of ~~$304~~$600 million under our revolving credit facility and $50 million under the Netsmart revolving credit facility. Refer to Note 15, “Subsequent Events,” for information regarding an additional borrowing of $185.0 million under our revolving credit facility to fund a business acquisition that occurred subsequent to September 30, 2017.TheThe change in our cash and cash equivalents balance is reflective of the following:

	Nine Months Ended September 30,								Six Months Ended June 30,
(In thousands)	2017			2016		$ Change			2018			2017			$ Change
Net (loss) income	$	(169,038	)	$	148	$	(169,186	)
Non-cash adjustments to net loss		346,219			159,228		186,991
Net income (loss)									$	45,757		$	(151,576	)	$	197,333
Non-cash adjustments to net income (loss)										25,000			261,726			(236,726	)
Cash impact of changes in operating assets and liabilities		(3,998	)		25,782		(29,780	)		(4,217	)		(791	)		(3,426	)
Net cash provided by operating activities	$	173,183		$	185,158	$	(11,975	)	$	66,540		$	109,359		$	(42,819	)

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Net cash provided by operating activities decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable period primarily due to unfavorable working capital changes and higher costs during the ~~first nine~~six months ~~of 2017~~ended June 30, 2018 compared with ~~2016,~~the prior year comparable period, which primarily included ~~increased~~higher interest expense, ~~attributable to Netsmart’s non-recourse debt and higher~~ transaction-related and legal ~~expenses.~~expenses, and incentive-based compensation payments. The ~~increase~~decrease in non-cash adjustments to net loss was primarily driven by lower other-than-temporary non-cash impairment charges associated with long-term ~~investments.~~investments during the six months ended June 30, 2018 compared with the prior year comparable period.

	Nine Months Ended September 30,									Six Months Ended June 30,
(In thousands)	2017			2016			$ Change			2018			2017			$ Change
Capital expenditures	$	(40,216	)	$	(25,046	)	$	(15,170	)	$	(16,613	)	$	(25,035	)	$	8,422
Capitalized software		(107,079	)		(69,994	)		(37,085	)		(68,987	)		(71,582	)		2,595
Cash paid for business acquisitions, net of cash acquired		(54,308	)		(935,280	)		880,972			(179,041	)		(3,975	)		(175,066	)
Cash received from sale of businesses, net											246,801			0			246,801
Purchases of equity securities, other investments and related intangible assets		(5,423	)		(20,685	)		15,262			(2,723	)		(1,323	)		(1,400	)
Other proceeds from investing activities		215			37			178			45			0			45
Net cash used in investing activities	$	(206,811	)	$	(1,050,968	)	$	844,157		$	(20,518	)	$	(101,915	)	$	81,397

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Net cash used in investing activities decreased during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable period, primarily due to ~~the acquisition of Netsmart, Inc. for $906 million, net of cash acquired, and $21~~$247 million of ~~new third-party investments~~net cash proceeds from the divestiture of the OneContent business during the ~~nine months ended September 30, 2016,~~second quarter of 2018, partly offset by ~~increased spending~~$179 million of net cash paid for ~~capital expenditures~~the acquisitions of Health Grid, Practice Fusion and ~~capitalized software costs~~two other third parties during the ~~nine~~six months ended ~~September~~June 30, 2017. During the nine months ended September 30, 2017, we acquired $2.8 million in equity investments in third parties and a $2.6 million convertible note issued by another entity in which we also hold an equity investment. 2018.The increase in capital spending during the nine months ended September 30, 2017 is partly due to Netsmart. During the third quarter of 2017, Netsmart acquired DeVero for $48.5 million, net of cash acquired. In addition, during the first quarter of 2017, Netsmart entered into an Asset Purchase Agreement with a third party ~~for an aggregate cash consideration of $4.0 million,~~ to acquire a business consisting of intellectual property, certain contractual relationships and certain ~~associates.~~associates, for an aggregate cash consideration of $4.0 million.

	Nine Months Ended September 30,									Six Months Ended June 30,
(In thousands)	2017			2016			$ Change			2018			2017			$ Change
Proceeds from sale or issuance of common stock	$	0		$	84		$	(84	)	$	212		$	-		$	212
Proceeds from issuance of redeemable convertible preferred stock - Netsmart		0			333,606			(333,606	)
Excess tax benefits from stock-based compensation		0			972			(972	)
Taxes paid related to net share settlement of equity awards		(6,777	)		(7,379	)		602			(8,610	)		(6,554	)		(2,056	)
Payments on debt instruments		(124,294	)		(84,365	)		(39,929	)		(222,822	)		(116,905	)		(105,917	)
Credit facility borrowings, net of issuance costs		189,698			654,135			(464,437	)		275,843			120,000			155,843
Repurchase of common stock		(12,077	)		(71,082	)		59,005			(101,905	)		(12,077	)		(89,828	)
Payment of acquisition financing obligations		(2,398	)		0			(2,398	)		(3,226	)		0			(3,226	)
Proceeds from sales of subsidiary shares to non-controlling interest		1,494			0			1,494
Net cash provided by financing activities	$	45,646		$	825,971		$	(780,325	)
Purchases of subsidiary shares owned by non-controlling interest											(6,945	)		0			(6,945	)
Net cash used in financing activities										$	(67,453	)	$	(15,536	)	$	(51,917	)

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018 Compared with the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017

Net cash ~~provided by~~used in investing activities ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable period primarily due to $534 million, net of issuance costs, borrowed under Netsmart’s non-recourse Credit Agreements and $45 million borrowed under our revolving credit facility to partially finance the Netsmart Acquisition during the nine months ended September 30, 2016. In addition, Netsmart received $334 million in proceeds from the issuance of redeemable convertible preferred stock during the second quarter of 2016. During the nine months ended September 30, 2017, Netsmart borrowed an additional $51 million under its senior secured term loan, primarily used to finance its acquisition of DeVero, Inc. Additionally, we repurchased a smaller amount higher repurchases of common stock and repayments of our credit facilities, partly offset by higher net borrowings under our credit facilities, during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 compared with the prior year comparable period. The additional borrowings during the six months ended June 30, 2018 were primarily used to fund the acquisitions Health Grid, Practice Fusion and two other third parties. We also used $6.9 million to acquire the outstanding minority interest in a third party in which we initially acquired a controlling interest in April 2015.

The following table summarizes our required minimum future payments under the 1.25% Notes, the Senior Secured Credit Facility and Netsmart’s Non-Recourse Debt as of ~~September~~June 30, 2017. Refer to Note 15, “Subsequent Events,” for information regarding an additional borrowing of $185.0 million under the Senior Secured Credit Facility to fund a business acquisition that occurred subsequent to September 30, 2017.2018.


(In thousands)	Total		Remainder of 2017		2018		2019		2020		2021		Thereafter		Total		Remainder of 2018		2019		2020		2021		2022		Thereafter
Principal payments:
1.25% Cash Convertible Senior Notes ⁽¹⁾	$	345,000	$	0	$	0	$	0	$	345,000	$	0	$	0	$	345,000	$	0	$	0	$	345,000	$	0	$	0	$	0
Senior Secured Credit Facility ⁽²⁾		470,000		6,250		28,125		40,625		395,000		0		0		693,750		10,000		20,000		27,500		30,000		37,500		568,750
Netsmart Non-Recourse Debt⁽²⁾
First Lien Term Loan		480,533		1,217		4,866		4,866		4,866		4,866		459,852		476,883		2,433		4,866		4,866		4,866		4,866		454,986
Second Lien Term Loan		167,000		0		0		0		0		0		167,000		167,000		0		0		0		0		0		167,000
Total principal payments		1,462,533		7,467		32,991		45,491		744,866		4,866		626,852		1,682,633		12,433		24,866		377,366		34,866		42,366		1,190,736
Interest payments:
1.25% Cash Convertible Senior Notes ⁽¹⁾		12,939		0		4,313		4,313		4,313		0		0		10,782		2,156		4,313		4,313		0		0		0
Senior Secured Credit Facility ^{(2) (3)}		43,905		4,323		16,748		15,604		7,230		0		0		135,290		15,249		29,915		29,067		27,929		26,693		6,437
Netsmart Non-Recourse Debt
First Lien Term Loan ⁽⁴⁾		156,668		7,007		27,850		27,566		27,282		26,998		39,965		148,359		15,185		30,137		29,827		29,517		29,206		14,487
First Lien Revolver ⁽⁵⁾		938		63		250		250		250		125		0		750		125		250		250		125		0		0
Second Lien Term Loan ⁽⁶⁾		112,901		4,516		18,064		18,064		18,064		18,064		36,129		104,495		9,500		18,999		18,999		18,999		18,999		18,999
Total interest payments		327,351		15,909		67,225		65,797		57,139		45,187		76,094		399,676		42,215		83,614		82,456		76,570		74,898		39,923
Total future debt payments	$	1,789,884	$	23,376	$	100,216	$	111,288	$	802,005	$	50,053	$	702,946	$	2,082,309	$	54,648	$	108,480	$	459,822	$	111,436	$	117,264	$	1,230,659

~~We are currently~~On February 15, 2018, we amended and restated our Senior Secured Credit Facility. The Second Amended and Restated Credit Agreement provides for a $400 million senior secured term loan and a $900 million senior secured revolving facility, which represent increases from the $250 million term loan and $550 million revolving facility provided under our 2015 Credit Agreement, respectively, each with a five-year term. Refer to Note 8, “Debt” to our consolidated financial statements included in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information regarding our ~~seventh year of a ten-year agreement~~amended Senior Secured Credit Facility.

During 2017, we completed renegotiations with Atos ~~(formerly known as Xerox Consultant Services)~~and our other largest hosting partners to ~~provide services to support~~improve the operating cost structure of our private cloud hosting operations. As a result of these renegotiations, we signed a new restated and amended agreement with Atos and, therefore, starting in 2018, we began to transition substantially all of our hosting services to Atos. The increased scale of the relationship is expected to result in future reductions in the base fees and volume fee rates. The new amended and restated agreement extends the term to 2023 with annual auto-renewal periods for ~~our Sunrise acute care clients. We maintain all client relationships and domain expertise with respect to the hosted applications.~~an additional two years thereafter. The new agreement ~~includes~~also provides for the payment of an initial annual base ~~amount~~fees of ~~$50~~$30 million per year (decreasing to $25 million by the end of the agreement) plus charges for volume-based services ~~incremental to~~currently projected using volumes estimated based on historical actuals and forecasted projections. During the ~~base agreement. We incur approximately $5.0~~three and six months ended June 30, 2018, we incurred $14 million and $28 million, respectively, of expenses ~~per month~~ under ~~this~~our agreement with Atos, which are included in ~~client services~~ cost of revenue in our consolidated statements of operations.

Our total investment in research and development efforts during ~~2017~~2018 is expected to increase compared with ~~2016~~2017 as we continue to build and expand our capabilities in emerging areas of health care, such as precision medicine and population health analytics, and our traditional offerings in the ambulatory and acute markets. Our total spending consists of research and development costs directly recorded to expense which are offset by the capitalization of eligible development costs. Capitalized software development costs for the three and nine months ended September 30, 2017, include $6.8 million and $23.5 million, respectively, of third-party software purchases to supplement our internal software development efforts, while there were no such purchases during the three and nine months ended September 30, 2016.

~~We plan to fund the purchase price under the Purchase Agreement for the EIS Business using cash on hand and borrowings under our senior secured credit facilities.~~

To supplement our statement of operations, the table below presents a non-GAAP measure of research and development-related expenses that we believe is a useful metric for evaluating how we are investing in research and development.

	Three Months Ended September 30						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Research and development costs directly recorded to expense	$	51,057		$	45,142		$	146,748		$	140,070		$	80,342		$	46,459		$	150,319		$	95,691
Capitalized software development costs per consolidated statement of cash flows(1)		35,497			32,888			107,079			69,994			36,760			37,571			68,987			71,582
Total non-GAAP R&D-related spending	$	86,554		$	78,030		$	253,827		$	210,064		$	117,102		$	84,030		$	219,306		$	167,273
Total revenue	$	449,442		$	392,384		$	1,289,008		$	1,124,463		$	525,577		$	426,091		$	1,039,503		$	839,566
Total non-GAAP R&D-related spending as a % of total revenue		19.3	%		19.9	%		19.7	%		18.7	%		22.3	%		19.7	%		21.1	%		19.9	%

We believe that our cash and cash equivalents of ~~$104 million, net of restricted cash of $5~~$141 million as of ~~September~~June 30, ~~2017,~~2018, our future cash flows, and our borrowing capacity under our ~~revolving credit facility~~Revolving Facility and ~~the Netsmart~~Netsmart’s revolving ~~credit~~ facility, taken together, provide adequate resources to fund our ongoing cash requirements for the next twelve months. We cannot provide assurance that our actual cash requirements will not be greater than we expect as of the date of this Form 10-Q. We will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services and technologies, and the repurchase of our common stock under our stock repurchase program, each of which might impact our liquidity requirements or cause us to borrow under our credit facilities or issue additional equity or debt securities.

If sources of liquidity are not available or if we cannot generate sufficient cash flow from operations during the next twelve months, we might be required to obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third parties, a combination thereof or otherwise. We cannot provide assurance that these additional sources of funds will be available or, if available, would have reasonable terms.

Contractual Obligations, Commitments and ~~Off Balance~~Off-Balance Sheet Arrangements

We have various contractual obligations, which are recorded as liabilities in our consolidated financial statements. Other items, such as operating lease contract obligations, are not recognized as liabilities in our consolidated financial statements but are required to be disclosed.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, in the ordinary course of business, we amended or renewed multi-year service agreements with third-party software vendors, which resulted in increases of approximately ~~$20~~$12.9 million, ~~$34~~$12.1 million, ~~$28~~$9.0 million, ~~$11~~$1.6 million and $3$0.9 million to our future purchase obligations amounts for the years ending December 31, ~~2017,~~ 2018, 2019, 2020, 2021 and ~~2021,~~2022, respectively, previously disclosed in our Form 10-K.

Our market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our Form 10-K have not changed materially during the ~~quarter~~six months ended ~~September~~June 30, ~~2017.~~2018.

Under the direction of our chief executive officer and chief financial officer, we evaluated our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2018.

On ~~August 25,~~October 2, 2017 we purchased the EIS Business, on February 13, 2018 we acquired ~~substantially all of the assets of NantHealth’s provider/patient engagement solutions business~~Practice Fusion and on May 18, 2018 we acquired Health Grid as further described in Note 2,3, “Business Combinations”~~, of the notes~~ to our consolidated financial ~~statements.~~statements included in Part I, Item 1, “Financial Statements” of this Form 10-Q. We continue to integrate policies, processes, people, technology and operations from ~~that transaction,~~these transactions, and we will continue to evaluate the impact of any related changes to internal control over financial reporting during ~~the remainder of our 2017~~this 2018 fiscal year. We have implemented, and continue to refine, internal controls related to the new revenue recognition accounting standard which we adopted on January 1, 2018. Except for any changes in internal controls related to the ~~inclusion~~adoption of ~~Netsmart’s internal controls in~~ the ~~Company’s control environment~~new revenue recognition accounting standard and the integration of the ~~NantHealth provider/patient engagement solutions business~~EIS Business, Practice Fusion and Health Grid into Allscripts, there have been no other changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2017,~~2018, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We hereby incorporate by reference Note 12, “Contingencies,” of the Notes to Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

~~Except for the additional risk factor set forth below, there~~There have been no material changes during the quarter ended ~~September~~June 30, ~~2017~~2018 from the risk factors as previously disclosed in our Form 10-K.

~~Our acquisition of the EIS Business is subject to material risks and uncertainties~~

The success of our acquisition of the EIS Business will depend, in part, on our ability to achieve the expected benefits of the acquisition and to integrate our existing businesses with those of the EIS Business, including the integration of products and technologies. This integration will be complex, costly and time-consuming and will involve numerous risks, including, but not limited to, unanticipated expenses and the diversion of financial, managerial, and other resources from both our existing operations and those of the EIS Business. If we fail to successfully integrate the EIS Business, we may not be able to achieve projected results or support the amount of consideration paid for the EIS Business, which could materially and adversely impact our business, financial condition and operating results. In addition, as previously announced by McKesson, the Horizon product line of the EIS Business will be sunset in March 2018. The transition away from the Horizon product line may involve anticipated and unanticipated costs and liabilities, including severance costs, customer attrition and customer claims relating to such transition, any of which could materially and adversely impact our business, financial condition and operating results.

In addition, as previously announced by McKesson, the EIS Business is subject to a May 2017 civil investigative demand (CID) from the U.S. Attorney’s Office for the Eastern District of New York. The CID requests documents and information related to the certification McKesson obtained in connection with the U.S. Department of Health and Human Services’ Electronic Health Record Incentive Program. In our purchase agreement with McKesson, McKesson has agreed, with respect to the CID, to indemnify Allscripts for amounts paid or payable to the government (or any private relator) involving any products or services marketed, sold or licensed by the EIS Business as of or prior to the closing. If the CID results in non-monetary relief, significant compliance or litigation costs, or any losses to Allscripts that are not covered by the indemnification from McKesson, such relief, costs or losses could materially and adversely impact our business, financial condition and operating results.

On November 17, 2016, we announced that our Board approved a stock purchase program under which we may repurchase up to $200 million of our common stock through December 31, 2019. On August 2, 2018, we announced that our Board approved a new stock purchase program under which we may repurchase up to $250 million of our common stock through December 31, 2020, replacing the prior stock repurchase program. Any stock repurchases may be made through open market transactions, block trades, privately negotiated transactions (including accelerated share repurchase transactions) or other means, subject to market conditions.

Any repurchase activity will depend on many factors such as our working capital needs, cash requirements for investments, debt repayment obligations, economic and market conditions at the time, including the price of our common stock, and other factors that we consider relevant. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

~~There was no~~The following table summarizes the stock repurchase activity ~~during~~for the three months ended ~~September~~June 30, ~~2017. The~~2018 and the approximate dollar value of shares that may yet to be purchased pursuant to our stock repurchase ~~program as of September 30, 2017 was $163.9 million.~~program:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PAGE
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2739
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4255
Item 4.	Controls and Procedures	4255
PART II. OTHER INFORMATION		4356
Item 1.	Legal Proceedings	4356
Item 1A.	Risk Factors	4356
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4356
Item 6.	Exhibits	4457
SIGNATURES		4558

	Three Months Ended June 30, 2018
(In thousands, except per share amounts)	As reported under ASC 606			Adjustments due to ASC 606			Pro forma under ASC 605
Software delivery, support and maintenance	$	336,406		$	(6,107	)	$	330,299
Client services		189,171			(887	)		188,284
Gross profit		212,663			(7,141	)		205,522
Selling, general and administrative expenses		149,081			111			149,192
Loss from operations		(58,797	)		(7,252	)		(66,049	)
Income (loss) from continuing operations before income taxes		78,639			(7,590	)		71,049
Income tax (provision) benefit		(3,683	)		1,997			(1,686	)
Net income (loss)		74,272			(5,593	)		68,679
Net income (loss) attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	64,824			(5,593	)	$	59,231
Earnings (loss) per share - basic attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	0.36			(0.03	)	$	0.33
Earnings (loss) per share - diluted attributable to Allscripts Healthcare Solutions, Inc. stockholders	$	0.36			(0.03	)	$	0.33

(In thousands)	Three Months Ended March 31, 2018		Three Months Ended June 30, 2018
Revenue related to deferred revenue balance at beginning of period	$	204,297	$	215,519
Revenue related to new performance obligations satisfied during the period		257,222		244,082
Revenue recognized under "right-to-invoice" expedient		49,638		62,812
Reimbursed travel expenses, shipping and other revenue		2,769		3,164
Total revenue	$	513,926	$	525,577

Performance Obligation	Revenue Recognition Pattern	Measure of progress
Support and maintenance ("SMA")	Over time	Output method (time elapsed) – revenue is recognized ratably over the contract term
Software as a service ("SaaS")	Over time	Output method (time elapsed) – revenue is recognized ratably over the contract term
Private cloud hosting	Over time	Output method (time elapsed) – revenue is recognized ratably over the contract term
Client/Education services	Over time	Input method (cost to cost) – revenue is recognized proportionally over the service implementation based on hours
Outsourcing services	Over time	Input method (cost to cost) – revenue is recognized proportionally over the outsourcing period
Payerpath (transaction volume)	Over time	Output method ("right-to-invoice" practical expedient) – value transferred to the customer is reflected on invoicing.
Software licenses	Point in time	Upon shipment or electronically delivered, as applicable
Hardware	Point in time	Upon shipment

	As Reported			Adjustments			Adjusted
(In thousands, except per share amounts)	December 31, 2017			due to ASC 606			January 1, 2018
Accounts receivable, net	$	567,873		$	(32,529	)	$	535,344
Contract assets		0			92,447			92,447
Prepaid expenses and other current assets		115,463			11,646			127,109

Deferred revenue, current		546,830			(10,423	)		536,407
Deferred revenue, long-term		24,047			0			24,047
Deferred taxes, net		93,643			21,392			115,035
Accumulated deficit		(338,150	)		60,595			(277,555	)

	(In thousands)
Aggregate purchase price	$	60,000
First earnout payment paid by Allscripts		10,000
Fair value of contingent consideration payment		23,915
Closing purchase price adjustments		1,804
Total consideration paid for Health Grid	$	95,719

	(In thousands)
Cash and cash equivalents	$	1,783
Accounts receivable, net		3,968
Prepaid expenses and other assets		186
Fixed assets		200
Intangible assets		41,000
Goodwill		53,747
Accounts payable and accrued expenses		(478	)
Deferred revenue		(700	)
Long-term deferred tax liability		(3,987	)
Net assets acquired	$	95,719

	(In thousands)
Cash	$	1,742
NantHealth common stock		42,750
Less: Value assigned to modification of existing commercial agreement with NantHealth		(22,700	)
Total consideration for NantHealth provider/patient solutions business	$	21,792

	(In thousands)
Aggregate purchase price	$	100,000
Add: Net working capital surplus		469
Less: Adjustment for assumed indebtedness		(1,684	)
Add: Closing cash		14,951
Total consideration paid for Practice Fusion	$	113,736

(in thousands)	Level 3 Instruments
Balance at December 31, 2017	$	4,143
Additions		23,915
Payments		(340	)
Fair value adjustments		(307	)
Balance at June 30, 2018	$	27,411

(In thousands)	Foreign Currency Translation Adjustments			Unrealized Net Losses on Available for Sale Securities ⁽¹⁾			Unrealized Net Gains on Foreign Exchange Contracts			Total
Balance as of December 31, 2016 ⁽²⁾	$	(6,028	)	$	(56,420	)	$	619		$	(61,829	)
Other comprehensive (loss) income before reclassifications		2,347			(85,652	)		1,411			(81,894	)
Net losses reclassified from accumulated other comprehensive loss		0			142,165			(777	)		141,388
Net other comprehensive (loss) income		2,347			56,513			634			59,494
Balance as of June 30, 2017⁽³⁾	$	(3,681	)	$	93		$	1,253		$	(2,335	)

(In thousands, except per share amounts)
					Total Number		Approximate
					Of Shares		Dollar Value
					Purchased		Of Shares
					As Part Of		That May Yet
	Total		Average		Publicly		Be Purchased
	Number		Price		Announced		Under The
	Of Shares		Paid Per		Plans Or		Plans Or
Period (Based on Trade Date)	Purchased		Share		Programs		Programs
04/01/18—04/30/18		0	$	0.00		0	$	106,422
05/01/18—05/31/18		3,169	$	12.57		3,169	$	66,596
06/01/18—06/30/18		358	$	12.32		358	$	62,186
		3,527	$	12.54		3,527

ALLSCRIPTS HEALTHCARE SOLUTIONS, INC.

By:		/s/ Dennis M. Olis
		Dennis M. Olis
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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